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i 



EXERCISES IN 
CURRENT ECONOMICS 



HAMILTON 



THE UNIVERSITY OF CHICAGO PRESS 






MATERIALS FOR THE STUDY 
OF ECONOMICS 



EXERCISES IN CURRENT ECONOMICS 



THE UNIVERSITY OF CHICAGO PRESS 
CHICAGO, ILLINOIS 



THE BAKER & TAYLOR COMPANY 

NEW YORK 



THE CAMBRIDGE UNIVERSITY PRESS 

LONDON 

THE MARTJZEN-KABUSHIKI-KAISHA 

TOmrO, OSAKA, KYOTO, FUKUOKA, SENDAI 

THE MISSION BOOK COMPANY 

SHANGHAI 



EXERCISES IN 
CURRENT ECONOMICS 



By 



WALTON HALE HAMILTON 



REVISED EDITION 




THE UNIVERSITY OF CHICAGO PRESS 
CHICAGO, ILLINOIS 




Copyright 1916 and 1920 Bv 
The University of Chicago 



All Rights Reserved 



Published September 191 6 
Second Edition February 1920 



MAR -1 1920 



Composed and Printed By 

The University of Chicago Press 

Chicago, Illinois, U.S.A. 



)aA559880 



i 



:v^f^ 



PREFACE 

This book of exercises has been prepared to accompany the 
author's Current Economic Problems. It follows the larger book, 
division by division and section by section. 

Each of the lessons which make up this volume falls into four 
parts. The first gives a short statement introductory to the topic 
announced. These statements are supplementary to the introductions 
to the chapters of the larger book. The second gives, by number, 
the readings in Current Economic Problems which fall under the topic 
for discussion, and other readings which throw light upon the matter 
under consideration. The latter are intended to show something of 
the many cross-currents in economic life and to indicate the intimate 
connection between seemingly independent problems. The third 
contains a list of questions bearing upon the reading. An attempt 
has been made so to word them that they do not call for mere repeti- 
tion ; that in answering them the student is forced to give something 
of his own. The fourth^esents a series of problems based indirectly 
upon the reading. They are intended to test the student's acquisi- 
tion of something more than the mere language of economics, his 
assimilation of readings presenting divergent materials, and his 
ability to orient his thought in the face of conflicting opinions and tes- 
timony. These problems form the real test of the student's reading 
and study. 

The author is under serious obligations to the authors of several 
books of problems for many of the exercises in this volume. Wherever 
possible, acknowledgment has been given. Where he has taken the 
liberty of restating a problem to adapt it to the materials here used, 
it has seemed unfair to charge it to the account of the original author. 
Moreover, this customary designation fails to express the full measure 
of the author's obligations; for the general influence exerted upon 
the method here employed by those who have published books of 
problems has been so great that indebtedness for specific problems is 
small by comparison. 

W. H. H. 

Amherst College 

December 8, 1919 



Vll 



CONTENTS 

PAGE 

I. The Problem of Control in Industrial Society. . . i 

1. Modern Industrial Society . , i 

2. The Nature of Economic Problems 2 

3. The Nature of Progress 4 

4. The Control of Economic Activity 6 

5. The Theory of Laissez Faire 7 

6. The Interpretation of Laissez Faire 8 

7. The Protest against IndividuaHsm 9 

8. The Reappearance of the Problem of Control .... 10 

11. The Antecedents of Modern Industrialism . . . . 12 

9. Pre-industrial Economy 12 

10. Pre-industrial Commerce . 13 

11. Pre-industrial Policy 14 

12. Pre-industrial Rights and Duties 16 

III. The Industrial Revolution . 17 

13. The Antecedents of the Revolution ....... 17 

14. The Nature and Scope of the Revolution ..... 18 

15. The New Industrialism 19 

16. The World of Labor . . 20 

17. National Expressions of Industrialism ...... 21 

18. The Extension of Industriahsm 22 

IV. The Pecuniary Basis of Economic Organization . . 25 

19. Price as an Organizing Force ......... 25 

20. The Organization of Prices 26 

21. Pecuniary Competition 27 

22. Price-Fixing by Authority 28 

23. The Function of the Middlemen 29 

24. Speculation 30 

25. The Corporation 31 

26. The Organization of Trades . 32 

V. Problems of the Business Cycle. ....... 34 

27. The Delicate Mechanism of Industry 34 

28. The Economic Cycle 35 

ix 



X CONTENTS 

PAGE 

29. The Course of a Crisis 36 

30. Industrial Conditions During a Depression 36 

31. War and the Cycle 37 

32. Control of the Industrial Cycle 38 

VI. The Problem of Economic Organization for War . . 41 

$:^. The Nature of Modern War 41 

34. The Sinews of War 42 

35. Methods of Industrial MobiUzation 43 

36. Mobilization in Liberal Countries 44 

37. Getting Out of War 46 

VII. The Problem of International Trade ...... 48 

38. The Basis of International Trade 48 

39.. The Perennial Argument for Restriction ...... 49 

40. The Case for Protection 51 

41. The Tariff and Wages 53 

42. Tariff Policy in Process 54 

43. The Argument from Experience 55 

44. Protection in Practice 56 

45. The Tariff and World-Trade. . . ." 58 

46. Trade and the Peace of the World 59 

VIII. The Problem of Railway Regulation 61 

47. The Basis of the Problem 61 

48. Aspects of Rate-Making 62 

49. The Nature and Extent of Regulation 63 

50. Valuation of the Railroads 64 

51. The Railroads in War Time 65 

52. The Crisis in Railway Policy . 67 

IX. The Problem of Capitalistic Monopoly 69 

S^. Is Monopoly Inevitable ? . * 69 

54. Conditions of Monopolization 70 

55. Types of Unfair Competition 71 

56. The Regulation of Monopoly . 72 

57. The Future of Regulation 73 

X. The Problems of Population 76 

58. The Question of Numbers 76 

59. The Malthusian Theory 77 

60. The Coming of the Immigrant 78 

61. Immigration and Industrial Development 80 



CONTENTS xi 

PAGE 

62. Immigration and Labor Conditions . 81 

63. The Restriction of Immigration 82 

64. The Future of the Immigrant . 83 

65. The Quahty of Population . * 85 

66. The Population Problem of Today 86 

XI. The Problems of Economic Insecurity 88 

67. Insecurity under Modern Industrialism 88 

68. Unemployment 89 

69. Industrial Accidents 90 

70. Sickness and Health 91 

71. The Standard of Living 93 

72. The Minimum Wage 94 

73. The Hazards of the Child 95 

XIL The Problems of Unionism and the Wage Contract . 97 

74. Group and Class Consciousness 97 

75. Viewpoints and Unionism 98 

76. The Theory of Unionism 99 

77. The Weapons of Industrial Conflict loi 

78. Unionism in War Time 102 

79. Woman's Invasion 103 

80. Revolutionary Unionism 164 

XIII. Problem of Control within Industry 106 

81. Unrest 106 

82. Output ....'.• 107 

83. Eflficiency 108 

84. Order 109 

85. Pohtics . . . ; . Ill 

86. Standards 112 

XIV. Social Reform and Legal Institutions 114 

87. The Legal System 114 

88. Private Property 115 

89. Industrial Liberty 117 

90. The Courts and Labor 118 

XV. Social Reform and Taxation . 121 

91. The Theory of Public Finance 121 

92. Nature of War Finance . 122 

93. War Taxes 124 1 

94. Tendencies in Finance 125 



xu CONTENTS 

PAGE 

XVI. Comprehensive Schemes of Reform 127 

95. The Voice of Social Protest 127 

96. The Burden of the War 128 

97. State SociaHsm .' . . .128 

98. Socialist Arguments for the Masses . . . . . . 130 

99. Gild SociaHsm. 131 

100. Some Reconstruction Programs .132 

XVII. The Control of Industrial Development .... 134 

loi. Industry an Instrument 134 

102. Control by Magic — Panaceas . 135 

103. Control by Method 136 

104. Checks on Development . 137 

105. Control by Education 138 

106. The Future of Industrial Society 140 



I. THE PROBLEM OF CONTROL IN INDUSTRIAL SOCIETY 

Note. — In each of the sections of this book the following symbols are 
employed: A, for the introduction to the section; B, for references to 
readings in Current Economic Problems, by number; C, for questions based 
directly upon the readings; and D, for problems based indirectly upon the 
readings. 

I. Modern Industrial Society 

A. Our economic problems have their being, not only as a part 
of a particular economic system, but as part of a peculiar culture at 
a particular stage of its development. They are rooted in our vast 
complex of businesses, markets, machines, and industrial function- 
aries; but their life comes from the world of ideas in which they 
thrive. About the whole of our material life and activities there 
lies a scheme of standards, aptitudes, and habits of thought which 
give to the Western world a spirit and a purpose all its own. Out of 
a past, reaching into the vague unknown, this scheme of values has 
been developed. It gives character to our system, determines the 
nature of its problems, and in a myriad subtle ways conditions their 
solution. To understand our problem aright we must know some- 
thing of the current stage of this developing culture. 

B. Readings: Introduction to I, i, 2. See also 49, 310, 385. 

C. I. Why should an account of the peculiar characteristics of 
modern industrialism be presented at the beginning of a course in 
economic problems? 2. What bearing has each of the five enumer- 
ated characteristics of modern industrialism upon the nature of 
economic problems? 3. In what sense is it correct to say that we 
are at the end of the "exploitative period" in American economic 
development? 4. In what important respects is American industrial 
society different from what it was at the end of the Civil War? 

D. I. Compare Ameritan industrial society with Chinese 
society in as many respects as you can. What gives American 
industrial society its individuality? 

2. Why was the doctrine that the state should keep hands off 
and allow the individual to work out his own destiny so popular in 
America in the nineteenth century? 



2 CURRENT ECONOMIC PROBLEMS 

3. Connect the abundance of our natural resources with the 
small number of serious problems which American society has con- 
fronted in the past. 

4. What new issues were appearing in our political life during 
the decade before the beginning of the European War ? What was 
their importance ? 

5. State as specifically and as definitely as you can what is in- 
volved in the problem of ''reconstruction." 

2. The Nature of Economic Problems 

A. Economics, like every other science, attempts to answer a 
fundamental question and to raise a fundamental problem. Its 
question is, Why are all of us as well off, or as bad off, as we are; 
and why are some of us better off, or, if you please, worse off, than 
others?^ Its problem is. How can we as a community become better 
off, or escape becoming worse off, than we are at present? This, 
quite likely, involves the possibility of some of us becoming better off, 
or worse off, than we are at present, at the expense of others of us. 
Into this larger problem the miniature problems of our world, which 
we study and attempt to solve, all resolve themselves. Before 
studying particular problems we should attempt to find out what an 
economic problem is like. 

B. Reading 3. Make a rapid survey of the Table of Contents 
of Current Economic Problems. 

C. I. What is an economic problem? Give examples. 2. What 
is meant by calling a problem current? 3. Are there many economic 
problems or one economic problem? 4. Can economic problems be 
solved? 5. If a problem involves a "choice between conflicting and 
incommensurable values," how can it be disposed of? 

D. I. Make a list of the more important questions which you 
have heard discussed as problems of "reconstruction." Add the 
other important problems of the day. 

2. Which of these problems are primarily economic? Which, 
primarily non-economic, have important economic aspects? Which 
are non-economic? 

^ Edwin Cannan, Wealth, v. 



CONTROL IN INDUSTRIAL SOCIETY 3 

3. How long has each of the following problems been with us: 
rich man and poor man? employer and employee? the ratio of popu- 
lation to industrial equipment? competition and monopoly? industrial 
crises? unemployment? the regulation of railway rates? the valuation 
of public-service utilities? the organization of national resources for 
war? reconstruction? Show the beginnings of any of these problems. 
What of the end? 

4. Use your knowledge of any of the problems enumerated above 
to illustrate the statement, ''Economic problems are in process of 
gradual solution." 

5. Make a list of a dozen problems which were of moment, ten, or 
better still, twenty years ago. What has become of each of them? 
What are the various ways in which they have been disposed of? 
How, after all, do economic problems get solved? 

6. In the solution of these problems what agencies of control 
were used? Was an effort made to secure immediate results or to 
secure a gradual ''improvement" in conditions? Did the attempt at 
solution secure the result at which it aimed, or did the entrance of 
new and unexpected factors give an unlooked-for result? Was 
attention directed to the real problem or only to a superficial aspect 
of it? 

7. Did the existence of these problems in the past imply the 
existence of great "evils"? Did their solution eliminate the "evils" 
or only change their form? Were they attended with the appear- 
ance of new and unexpected "evils"? 

8. Can we hope in time to rid ourselves of all economic ill? Can 
the fundamental economic problem mentioned in the introduction to 
this lesson eventually reach a solution? 

9. Can an economic problem, say that of the proper wage for 
miners, be studied and solved in isolation? Has it any relation to 
the problem of the high cost of hving? to the problem of financing 
the war? to the problem of public utihties? to the problem of the 
relationship of business to industry? to immigration? to American- 
ization ? 

10. State two alternative solutions to the problem with which 
you are best acquainted. Make a Hst of the probable consequences 



4 CURRENT ECONOMIC PROBLEMS 

which would attend each solution. Are the consequences all eco- 
nomic? If not, what kinds of non-economic consequences are 
involved? 

11. In your lists do you find all the good consequences on one side 
and all the bad on the other? How are good and bad economic 
consequences to be measured against each other? How are economic 
consequences to be measured against political, ethical, social, and 
religious consequences? 

12. How is a judgment between your alternative solutions to be 
made? Does your solution dispose of the problem in its entirety 
or only of a current aspect of it? 

13. Are the problems of rich and poor, and of employer and 
employee just what they have always been? Were these problems 
of five hundred, one hundred, or twenty years ago just what they are 
today? Is their nature affected by our modern scheme of arrange- 
ments, such as the modern state, property, and contract? Are they 
affected by our economic institutions, such as competition, division 
of labor, and international trade? 

14. "Economic problems are aspects of social development. 
Their solution is to be found in the direction of the growth of social 
life and insitutions." By examples show how economic problems 
are to be studied as phases of a general developing movement. How 
does this method of treatment differ from that of studying them in 
isolation? From this viewpoint show the necessity of a general 
historical setting for the problems. 

15. Show that each of the problems mentioned in this exercise 
is involved in the fundamental problem of economics as stated in 
the introduction to this lesson. State the problem in terms of its 
general historical setting. 

16. Draw up in an orderly form the conclusions you have reached 
as to the nature of current economic problems. 

3. The Nature of Progress 

A. The ultimate object of our study, it must not be forgotten, 
is the formulation of an economic program. But a program imphes 
an end to be attained. We must accordingly, though not necessarily 
in this lesson or, for that matter, in this course, eventually decide 



CONTROL IN INDUSTRIAL SOCIETY 5 

upon that end. The making of such a decision impUes a clear dis- 
tinction between development and progress, and the formulation of a 
working concept of the latter. 

B. Readings 4-6. See also 55, 56, 247, 278, 367, 372, 385, 402. 

C. I. Enumerate the more important aspects of human culture. 
Do they all move "forward" together? What do you mean by 
"forward"? 2. In what common term can you measure change in 
these various aspects of life? 3. Is a scientific definition of progress 
possible? 4. What is the importance of the distinction between 
evolution and progress? 5. In formulating a conception of progress 
what weight do you attach to the various criteria mentioned by 
Bryce? What important criteria does he omit? 

D. I. Can we as a national community determine what our 
future society is to be? 

2. Is civilization an advance over barbarism? Is our culture 
superior to that of the Middle Ages? Are England's political insti- 
tutions superior to those of Italy? How do you know? 

3. Let us suppose that wonderful improvements have just been 
made in the art of printing, but that their use is limited to "yellow" 
newspapers. Is society the better for the improvement? 

4. "To argue against control of industrial activity on the ground 
that such artificial restraint prevents the survival of the fittest is to 
argue in a circle." Prove. 

5. Is there a confusion between evolution and progress in any of 
the following quotations ? 

God's in his heaven, 
All's right with the world. 

Yet, I doubt not, through the ages one increasing purpose runs. 

One life, one law, one element, 

And one far off, divine event. 

To which the whole creation moves. 

I don't know where I'm going, 
But I'm on my way. 

6. "The greatest discovery of the nineteenth century is that we 
are on our way." Why? 



6 CURRENT ECONOMIC PROBLEMS 

7. ''The masses have never made any contribution to the develop- 
ment of civiHzation. All progress has been the result of the efforts 
of a very small and select group." What ideal is implicit in this 
quotation? Do you know of any people who have consciously acted 
upon it? What scheme of the distribution of wealth does it suggest? 
Should we adopt this ideal? 

8. "Social progress consists in bettering the material conditions 
of the masses." Answer the question asked under 7. 

9. Would you rather hve beneath God's blue sky or under capi- 
talistic smoke? Has the antithesis any bearing upon the problem of 
the tariff or of immigration? 

4. The Control of Economic Activity 

A. If, some time or other, we are to formulate an economic 
program, we must learn what the agencies of control are, how they 
act, and how they can be used. We must come to appreciate the 
vast and complex system of institutions which in the past have been 
slowly fashioned and which may be used singly or in combination. 
If their bewildering nature makes understanding hard and manipu- 
lation difficult, it merely evidences the multifarious and delicate 
work which they can be made to perform. It is the object of this 
lesson to make a beginning of an understanding of this system. 

B. Readings 7-9. See also 40, 43, 63, 68, 336, 385, 392, 397, 404. 

C. I. What agencies of control can be used to secure quick 
mechanical changes? Illustrate. 2. What agencies to secure gradual 
and organic adaptations? Illustrate. 3. What agencies can be used 
directly to secure the object aimed at? 4. What agencies effect 
their objects only indirectly? 5. What agencies mentioned in the 
readings are most often overlooked in programs of control? 6. By 
using examples, illustrate the dangers of overlooking important 
agencies of control. 

D. I. "A distinction between evolution and progress makes 
inevitable the elaboration of a program of control." Why? 

2. "Because of the multiplicity, variety, and efficiency of the 
agencies of control which we possess — despite the gravity of our 
ignorance — we could not escape having to use control if we would." 
Show why quite definitely. 



CONTROL IN INDUSTRIAL SOCIETY 7 

3. Why in the past has so important a place been given to the 
state in theories of control? 

4. Enumerate agencies of control habitually in use whose presence 
was made much clearer by the war; agencies of control brought into 
use by the war. 

5. What agencies of control were used to further each of these 
war-time activities: enlistment of men? floating of the "Liberty 
Loans"? sale of War Savings Stamps? production of an adequate 
supply of munitions? maintenance of the national morale? 

6. Which are the more effective agencies of control, the slowly 
developing institutions, such as family life, education, and ethical 
systems, or those promising immediate results, such as legislation, 
revolution, and the like? 

5. The Theory of Laissez Faire 

A. For our immediate purpose the most important aspect of 
the problem of control is that of the relation of the state to industry. 
The theory which dominated legislation during the nineteenth cen- 
tury was that of laissez faire. This theory is still quite potent. Its 
dominant note — that of limitation of the powers of government — 
presents a problem that will always be with us. In view of our 
larger problem we must form some notion of what laissez faire was 
— and is. 

B. Readings 10-16. See also 129, 136, 287, 335, 347, 348, 394. 

C. I. In what readings do you find an implied antithesis between 
nature and the state ? Is this antithesis necessary to the laissez faire 
theory? 2. Compare the views of Blackstone and Ravenstone; 
Rousseau and Godwin; Smith and Bentham. 3. What funda^ 
mental assumptions underlie the theory of laissez faire. 4. What has 
Opportunity in common with the laissez faire theory? 

D. I. Strip Adam Smith's argument against governmental 
restraints of its concrete matter and restate it in terms of the general 
relationship of industry and the state. 

2. "The philosophical basis of laissez faire is the fact that we 
cannot tell before the event who is wise and who is foolish." If this 
is true, under what conditions would you expect to find laissez faire 
generally accepted? 



8 CURRENT ECONOMIC PROBLEMS 

3. Is there any connection between the appearance of the so-called 
self-made man and a belief that in the industrial game the state 
should keep hands off? 

4. How can the state justify itseK in taxing the bachelor for the 
support of the public schools? Is this laissez faire? 

5. Why did laissez faire come with the settlement of America 
and the extension of the machine method of production? 

6. Write down three or four arguments in favor of laissez faire 
which you have recently heard. Compare them with the "classical" 
statements given in Current Economic Problems. 

6. The Interpretation of Laissez Faire 

A. To prove or disprove laissez faire is a simple matter. To 
analyze it, determine its elements and understand them is a difficult 
task. In content and form the theory seems unintelligible except 
against the background of the rapidly expanding machine culture 
which produced it. Its negative statement has served as a mask for 
the many positive features with which it is clothed; for it insists as 
strenuously upon authoritative guidance and interference at certain 
points as it opposes them at others. The question of its validity, 
accordingly, becomes not one of the general theory but of the specific 
proposals which make it up. 

B. Readings 17-19. See also 9, 24, 25, 144, 382. 

C. I. Do you accept the principle of utility? 2. What is its 
relation to laissez faire? 3. Detect evidence of changing opinion in 
Mill's mind when he wrote the discussion resumed in Reading 18. 

4. Wherein do you differ from Mill in his opposition to governmental 
interference? in his statement of the province of government? 

5. What interference does the laissez faire theory take for granted? 

D. I. Can there be a game without ''rules of the game"? Can 
there be such a thing as laissez faire? 

2. "The true function of the state is to suppress force and fraud." 
But what are force and fraud? 

3. Can laissez faire be laissez faire and take the policemen, 
property, and the courts for granted? What else does laissez faire 
take for granted? 



CONTROL IN INDUSTRIAL SOCIETY 9 

4. "To the practical man the precept 'Laissez faire' never meant 
'Leave everything alone/ or even 'Leave all natural things alone,' 
but simply, 'Leave alone certain things which I think ought to be 
left alone' " (Cannan). Illustrate by citing specific evidence of the 
actual relations of the state to industry in the laissez faire period. 

5. "Laissez faire was formerly a cry for militant reform." What 
is it now? 

6. "The acceptance of the idea of evolution has caused a restate- 
ment of the theory of laissez faire. Its goal was once 'the good of 
all.' It has now become 'the survival of the fittest.' " Explain in 
detail this change. 

7. "The interference by the state with the struggle of individuals 
for material success promotes inefficiency and prevents the survival 
of the fittest through whom alone society can obtain the production 
of an abundance of the good things of life." Overlooking minor 
points, criticize the argument that the absence of restraint will cause 
the survival of those fittest to produce. 

7. The Protest against Individualism 

A. For some time a spirit of protest has been arising against the 
extreme individualism which dominated our institutional develop- 
ment and our habits of thought in the nineteenth century. This is 
due in part to the changed ratio of our population to our naturp' 
resources and in part to the unsatisfactory social conditions w' 
have followed in the wake of the machine. It finds expressio' 

in the appearance of new problems — or problems new to r 
a changed attitude toward the relation of the state to ind^ 

B. Readings 20-22. See also 2, 70, 201, 236, 2 

385, 387. 

C. I. What connection is there between the ma 

poverty? Is the connection inevitable? 2. Why s 
to explain so much of current history in terms of ' 
frontier"? 3. What new issues involve changes ir 
changes in mental attitude? mere extensions of c 
what particulars does Brown's statement represen' 
situation? In what respects is it out of date? 



10 CURRENT ECONOMIC PROBLEMS 

D. I. Has American prosperity been due to our "fundamental 
institutions," our ''individualistic policies," or ''the wisdom of our 
statesmen"? Or has it been due to the potential resources of the 
country? 

2. Make a list of the "paramount issues" in American presidential 
elections since the Civil War. How do you account for the fact that, 
generally speaking, they have not been matters of great importance? 
Why are so many matters of tremendous import just now appearing 
on our horizon? 

3. Does the machine favor the concentration of wealth or its 
diffusion? 

4. Has the result of the war been a greater concentration or 
a greater diffusion of wealth? What groups are in better economic 
positions because of it? What groups are in poorer economic 
positions? 

5. "America of the nineteenth century was in a stage of in- 
creasing returns." "Democracy as yet has not proved its case." 
What is the connection between these two statements? 

8. The Reappearance of the Problem of Control 

A. In response to changing conditions there is appearing a new 

'^'^mand for control. In antithesis to the theory which is passing, it 

. ally subordinates the interests of the individual to those of the 

■^oup. It seeks solutions of our new problems in "programs," 

videly in spirit and content from those of the nineteenth 

s proposals are gradually becoming more definite. The 

'^ factor of increasing importance in any consideration 

mic problems. 

23-25. See also 7, 43, 341, 345. 35°. 3^3, 3^- 

'e Green's theory of individual liberty with Mill's. 

ion of Green's theory to several economic problems 

Vi. 3. On the basis of these readings outline the 

plutionary argument for letting things alone." 

t gathered from supplementary reading what 

faire is put to the actual test. 5. Make a care- 

m's statement of the limits of the province of 

IS. 



CONTROL IN INDUSTRIAL SOCIETY il 

D. I. "Social reform is only evolution conscious of itself." 
With this as a text, preach a sermon against the biological argument 
for letting things alone. 

2. "Laissez faire and social control are not antithetical proposals. 
Just as laissez faire has a positive side, so social control has a negative 
side. The real questions at issue are the nature, degree, and objects 
of control." By illustrations show the negative proposals implicit 
in control. Show the importance of the last sentence. 

3. Advocates of the two opposing doctrines agree that "the uni- 
verse has been so contrived that the interests of the individual and 
of society are identical." Show their difference as to how this 
identity is to be secured. 

4. "The aim of the advocates of laissez faire was not to eliminate 
certain functions of control, but to transfer them from the state to 
other agencies." What were the functions in question? To what 
other agencies were they transferred? 

5. Has liberalism in the last hundred years changed its end? its 
program? its theory? 

6. "The Fourteenth Amendment does not enact Herbert Spencer's 
Social Statics'' (Justice Holmes). Is there an antithesis between the 
fundamental presuppositions underlying our institutions and the 
incipient program of control? 

7. Determine quite definitely the meaning and implications of 
each of the following, and outline the program to which each would 
lead: (a) "the greatest good to the greatest number"; (^)- "equal 
rights to all, special privileges to none"; (c) "social justice"; 
(d) "equality of opportunity"; (e) "to each according to his pro- 
ductive ability"; (/) "from each according to his ability, to each 
according to his need." 

8. Are rights, privileges, functions, responsibilities, opportunities, 
abilities, and needs, things which exist in themselves, or is their 
existence conditioned by the general situation of which they are 
aspects? What relation has your answer to this question to your 
theory of control? 



II. THE ANTECEDENTS OF MODERN INDUSTRIALISM 

9. Pre-industrial Economy 

A. Manorial and gild economy have for us a double importance. 
First, they belong to industrial societies differing from ours in tech- 
nique, in organization, in class structure, and in the nature of their 
problems. The contrast should help us to a better appreciation of 
our problems and their peculiar dependence upon their historical 
setting. Second, they made important contributions to the develop- 
ment of the industrial society in which we live. In them we see the 
beginnings of an agricultural system, a market, a pecuniary valuation, 
and an industrial order. We note the tendency of the last to expan- 
sion, and the appearance of incipient industrial groups. 

B. Readings: Introduction to II, 26-31. See also 46, 113, 
218, 398. 

C. I. What is meant by the "self-sufficiency" of the manor? 
2. Compare the position of the villein with that of the agricul- 
tural laborer today; with the industrial laborer today. 3. Give 
American illustrations of "itinerant" and "home" work. 4. What 
gild practices seem to you most peculiar? 5. What part did the 
gild play in industrial development? 6. Cite examples of "household 
industry in America" which have come under your observation. 

D. I. "The manorial system was an aggregation of like units. 
Modern industrialism is an integration of a multitude of unlike 
units into a vast and intricate system." Illustrate. 

2. Why were industrial depression, unemployment, and the high 
cost of living not serious problems to the manor? What was the 
nature of economic disasters which mediaeval people had to fear? 

3. "The production of an agricultural surplus is a necessary 
prerequisite to a differentiated industrial system." "The size of 
the agricultural surplus fixes the limits of urban growth." On the 
basis of these and like statements write an essay upon the part 
played by the agricultural surplus in the development of modern 
industrialism. 

12 



THE ANTECEDENTS OF MODERN INDUSTRIALISM 13 

4. What advantages in industrial efficiency had the mediaeval 
system of serfdom over the Roman system of slavery? Did serfdom 
make any positive contribution to the agricultural surplus? 

5. ''The essential difference between the village and the town is 
that the village is a collection of homogeneous units, while the town 
is a collection of heterogeneous units differentiated and integrated." 
Translate into English and illustrate. 

6. Compare the market for which goods were produced by the 
gildsman with that which the modern business man has to consider. 
What differences do you note in the "business" problems involved? 

7. "To use modern terms which were meaningless then, the gilds- 
man was at once employer and workman, capitalist and laborer" 
(Ashley). Compare the "labor problems" of the gild and the modern 
industrial economy. Could labor unions have grown up in the 
mediaeval town? Could socialism have arisen? 

8. What contribution did gild economy make to each of the 
following: the market? the pecuniary system? the enlargement of 
the industrial community? modern industrial organization? modern 
technique? modern industrial groups? 

10. Pre-industrial Commerce 

A. Through commerce the small and self-sufficient communities 
of the mediaeval world gave place to the complex system of inter- 
dependent groups which we call modern industrialism. There has 
been a tendency, imperfect, to be sure, and arrested now and then, 
not only toward a universal industrial system, but to a world-wide 
society and a cosmopolitan culture as well. It has left its imprint 
upon all our institutions, political, economic, ethical, religious, and 
social. It has translated all our problems into terms of the larger 
social group. It has made the fact of interdependence of paramount 
importance in the consideration of the political and economic problems 
of our day. 

B. Readings 32-35. See also 47, 60, 62, 134, 168, 169. 

C. I . In what respects do the histories of commerce with which 
you are familiar fail to meet Forrest's definition? 2. Account for 
the opposition of the mediaeval church to commerce. 3. Did the 



14 CURRENT ECONOMIC PROBLEMS 

commercial activities of the church estabhsh permanent commercial 
relations? 4. Did they tend to establish habits of thought and 
practice favorable to commercial development? 5. Is there evidence 
in the selection from Macaulay that some of our problems are not 
as new as we think? 

D. I. "The history of commerce is the history of social and 
industrial development." Explain the part played by "economic 
differentiation and integration" in this process. 

2. Make a list of influences in the Middle Ages which were favor- 
able to the development of commerce; unfavorable to the develop- 
ment of commerce. 

3. "As an active instrument in the realization of a universal 
society commerce deserves to rank as the legitimate successor of 
the mediaeval church." Was this statement written before or after 
the war? How true is it? 

4. Show the dependence of commercial expansion upon an 
established political and legal system. For commercial development 
must the legal and political structure be rigid or flexible? 

5. What part has commerce played in the enlargement of the 
political unit? in suppressing local disorder? in rendering social 
arrangements more certain? in standardizing legal codes? in pre- 
venting war? 

6. "The interdependence which has come as the result of com- 
mercial development requires a stable international order." "By an 
arrangement between peoples international relations must be changed 
from chaos to order." Connect the development of commerce with 
the necessity of a political and legal system governing relations 
between nations. 

II. Pre-industrial Policy 

A. At many points mediaeval is strikingly in contrast with 
modern policy. A spirit of group solidarity, a distrust of individual 
initiative, a high regard for the interests of the consumer, the per- 
sonality of business relations, and the minute regulation of business 
activity alike seem strange to us. However, at present we are 
attempting to reclaim some of the ground which extreme individualism 
gave up and to re-create some of the values of the gild system. Yet 



THE ANTECEDENTS OF MODERN INDUSTRIALISM 1 5 

the gild system was no industrial Utopia. It may perchance be, if 
all the facts could be known, that our standards of business ethics 
are well in advance of those of this idyllic period. 

B. Readings 36-41. See also 380, 383, 385. 

C. I. Compare the property rights of the lord of the manor 
with those of the capitalist employer today. 2. Compare the position 
of the serf with that of the present employee. 3. Account for the 
spirit of solidarity in the mediaeval town. 4. In the town was 
honesty the best policy? Did the gildsmen think so? 5. In as 
many respects as you can contrast gild ideals and practice. 6. What 
problems connected with the welfare of the laborer were adequately 
answered by the plantation system? What problems were ignored? 

D. I. Is there reason to believe that mediaeval men acted from 
motives different from those which impel men today? 

2. ''The gild period was the golden age in industrial society. 
Class lines were obscure, the felling of brotherhood strong, the instinct 
of workmanship well developed, goods were sold at reasonable prices, 
and the general code of business ethics was high." "A contrast of 
the ideals and practice of the gild period shows the former to be 
sheer hypocrisy." What evidence lies back of each of these general- 
izations? What is overlooked in each? Were the ideals hypocrisy? 
Of what value were they? 

3. ''Property is a bundle of equities rather than a single right. 
Under the manorial system these equities were distributed between 
lord and man. Now they all belong to the employer." Explain in 
full. Is this statement the whole truth? 

4. "The whole body of municipal law can be reduced to two prin- 
ciples: first, sales must be public and at first hand; second, every- 
thing possible shall be produced in the town" (Ashley). Do you 
accept this statement? 

5. State any lingering survivals of mediaeval practice which have 
come under your observation. 

6. "The present tendency is back toward authoritative regula- 
tion of industry, toward regarding the industrial system as an instru- 
ment, and making it further the ends of society." Cite evidence in 
support of this statement. Of what value is mediaeval experience in 
solving the problems of control with which we are now confronted? 



l6 CURRENT ECONOMIC PROBLEMS 

12. Pre-industrial Rights and Duties 

A. Mediaeval life and thought found representation in an 
economic theory whose early expression is ethical and dominated by 
a sense of justice. This theory is to be found in the doctrine of 
stewardship, the theory of just price, the low value set upon commerce, 
and the prohibition of usury. The first two of these, temporarily 
eclipsed, have re-emerged in very recent proposals for authoritatively 
regulating industry and fixing wages. As the mediaeval scheme passed 
the emphasis was thrown upon the rights of the individual. Our great 
need is to build up a theory of responsibility to parallel the theory of 
rights which grew up just before the coming of modern industrialism. 

B. Readings 42-45- See also 330, 331, 347, 384, 387, 400. 

C. I. In what terms would the modern sociologist express 
Aquinas' doctrine of stewardship? 2. What conditions led to the 
elaboration of the bill of rights? 3. State its leading provisions. 
4. Account for the emphasis which American industrial development 
has placed upon "rights" as against "responsibilities." 5. Show the 
need for a modern bill of responsibilities. 

D. I. Bring to the class any arguments, discussions, or proposals 
which you have been able to find which have underlying them the 
doctrine of stewardship. 

2. "Should a dispute between mine operators and miners over 
the terms of employment be regarded as a private matter of the 
two parties?" Explain in full. 

3. "Because of machinery and prices our productive system is a 
co-operative one. There should be some test by which industrial 
agents could be held to their responsible work of production." Is 
the present standard of abihty to sell their products or services at a 
profit an adequate test? 

4. "In our society different functions are assigned to different 
agencies. If one does not perform a social function, he should be 
denied a share of the goods produced by society." Show that the 
theory underlying this statement is at variance with the theory of 
"natural rights." 

5. If the unborn could specify the conditions which must be met 
before they came into the world, for what might they reasonably 
ask? Draw up your answer in the form of a "Modern Bill of Rights." 



III. THE INDUSTRIAL REVOLUTION 
13. The Antecedents of the Revolution 

A. A comprehensive study of the antecedents of the Industrial 
Revolution is impossible. Every aspect of life — ethical, religious, 
political, industrial, intellectual, and philosophical — made its contri- 
bution to the movement. The march of events — the Renaissance, 
the great discoveries, the Reformation, the rise of nationalism, the 
settlement of America — 'all of these had their part in determining 
its coming. Commercial and geographical conditions caused it to 
appear first in England. In lieu of the complete story the readings 
presented suggest only a few of its many antecedents. They should, 
however, serve to reveal the movement as a slowly developing one 
comprehending all the threads which together make up life. 

B. Readings: Introduction to III, 46, 47. See also 2, 12, 35. 

C. I. Compare the industrial conditions on the eve of the 
revolution with those of manorial economy; of gild economy. 2. Was 
the laborer's position under the domestic system better or worse 
than it is now? 3. Is there any connection between "Spanish gold" 
and the steam engine? 4. Why did not the revolution come a cen- 
tury earlier? 

D. I. Why had so few improvements been made in technique 
from the fifth to the eighteenth century? 

2. Give illustrations from Toynbee, or elsewhere, of each of the 
following characteristics of industrial life before the revolution: the 
short time of the productive process; the limited extent of the market; 
the personal character of industrial relations; the permanent place of 
the laborer in an organized community. 

3. "It is only when people meet a crisis that they are ready to 
depart from their customary ways of doing things and to formulate 
new habits." Show how the opening of the New World brought 
England face to face with such a crisis. Show how, in the face of 
this crisis, the old system was bound to be revised. 

4. "The settlement of America was in no little measure responsible 
for the great inventions which marked the Industrial Revolution." 

17 



l8 CURRENT ECONOMIC PROBLEMS 

What influence had the settlement of America upon the extent of 
the market? the size of the factory? speciaHzation in production? the 
division of labor? the capitalistic organization of industry? the dis- 
play of inventive genius? 

5. Why did the Declaration of Independence, the French Revo- 
lution, Adam Smith's Wealth of Nations, the great mechanical inven- 
tions, and Goldsmith's Deserted Village appear within a few years of 
each other? 

6. ''The Industrial Revolution is to be explained very largely in 
terms of the changed ratio of industrial resources to population effected 
by the settlement of America." By clear-cut illustrations show the 
importance of this ratio. Give the argument which leads to the 
conclusion stated above. Do you accept it? 

14. The Nature and Scope of the Revolution 

A. Gradual as was its course, the industrial movement which 
we are studying wrought a great change in social life and values. 
The technique which is est . ^lished proceeded from new and radically 
different principles. The organization which it effected was marked 
by a new and radically different distribution of industrial functions. 
It placed the welfare of all groups upon a pecuniary basis. It resolved 
society anew into social strata. Finally, in a my raid ways, in the 
industrial, political, ethical, religious, and intellectual aspects of life, 
it established new standards, created new institutions, and raised 
new problems. 

B. Readings 48, 49. See also 95, 114, 126, 393. 

C. I. When did the Industrial Revolution begin? end? 2. What 
factors do you regard as of the greatest importance in the develop- 
ment of the new technique? 3. Illustrate how very slowly the prin- 
ciples of machine industry have been extended throughout the 
industrial system. 4. Give examples of establishments in which the 
new technique has only a partial hold; of industries to which as yet it 
has been little applied. 5. Was the "capitalist" a product of the 
revolution? the ''wage-earner"? 6. By illustrations show how many 
and what aspects of life have been affected by the revolution. 



THE INDUSTRIAL REVOLUTION 19 

D. I. ^'The economic discovery of America made the craft 
technique inadequate." What is meant by the "economic discovery" 
of America? How did it make the older technique obsolete? 

2. Point out the problems involved in the transition from the 
older to the newer technique; state the facts and principles which 
were necessary to a solution of these problems; and show how 
these were supplied by the scientific work of the seventeenth and 
eighteenth centuries. 

3. '^The revolution may be described in terms of three essential 
changes: the productive process has been lengthened, the market 
has been enlarged, and industrial relations have become impersonal." 
What problems of today are associated with each of these three 
changes? What essential changes have been omitted from the Hst 
above? 

4. "Modern civilization rests upon coal and iron." What 
important changes in the localization of industries have come about 
because of the dependence of the new technique upon these minerals? 
What part have they played in the growth or decline of nations in 
the nineteenth century? Can England hope to remain "the workshop 
of the world"? 

5. "Productive industry is dependent upon science. Physics, 
chemistry, metallurgy, geology, and biology contribute to the estab- 
lishment and extension of our industries." Illustrate the relation of 
the development of science to industrial development. 

6. In a discussion of the revolution why is so much attention 
given to the means of communication and transportation? 

7. "Many of our legal, political, and religious institutions are 
much more consonant with the spinning-wheel than with the electric 
dynamo." What have spinning-wheels or dynamos to do with legal, 
political, or religious institutions? 

15. The New Industrialism 

A. The new industrialism has its technical basis in the closely 
related capitalistic methods of production, the machine process, and 
the factory system. Its business basis is to be found in the institu- 
tions of the market, pecuniary valuation, and corporate organization 
which are discussed elsewhere. Upon this foundation there has been 



20 CURRENT ECONOMIC PROBLEMS 

created, not only a new industrial system, but a new economic culture. 
The modern problems of the home and the rise of the "economics of 
feminism" furnish a single example of the cultural changes which the 
new industrialism is effecting and the problems to which it gives rise. 

B. Readings 50-53. See also 84, 91, 92, 93, 115, 248„3i5, 316. 

C. I. Has capital caused an immense amount of modern wealth 
to be socialized? 2. Explain the definition of the factory system in 
terms of some establishment with which you are familiar. 3. Of 
what practical importance is the concept of the ''machine process"? 
4. In what ways has the organization of the home been affected by 
the coming of the machine? 

D. I. Is the argument that capital is socialized wealth a plea 
for an industrial aristocracy? 

2. "The individual is compelled to serve society by turning 
back into the productive process much of the profit derived from 
invested capital." What does this mean? Assuming it to be true, 
of what value is it to the legislator considering the minimum wage, 
the income tax, the protective tariff, or some similar proposal? 

3. The possession of what characteristics makes a good laborer 
under the domestic system? under the factory system? 

4. "By virtue of this concatenation of processes the modern 
industrial system at large bears the character of a comprehensively 
balanced mechanical process" (Veblen). Translate and illustrate. 

5. Show by examples the various ways in which the machine 
process has found expression in the educational work of our colleges 
and universities. 

6. Show by examples how the machine process has affected 
our daily habits, our ways of thought, and our attitudes on pubHc 
questions. 

7. Enumerate as many religious, ethical, political, and social 
problems as you can which have been affected by the Industrial 
Revolution. 

16. The World of Labor 

A, No aspect of the revolution has received so much attention 
as the rise of the "wage system" and the "industrial proletariat." 
Accordingly it seems well to emphasize this phase of the great trans- 
formation of society by presenting a selection upon the attitude of 



THE INDUSTRIAL REVOLUTION 2i 

labor toward machinery and two conflicting views upon what the 
revolution has meant for labor. The questions raised here will 
appear time and again in our later study. In fact a large part of 
Current Economic Problems is concerned with the problems of labor 
in modern industrial society. 

B. Readings 54-56- See also 234, 247, 255, 281, 318, 319, 321, 

343, 372. 

C. I. What evidence have you upon the subject of the attitude 
of labor toward machinery? 2. Account for the difference in views 
between Arnold and Benson upon what machinery has done for 
labor. 3. What are the questions at issue? 

D. I. Connect the Industrial Revolution with the rise of the 
Fourth Estate. 

2. Did the revolution increase, or decrease, the importance of 
contract? What has this to do with the welfare of the workers? 

3. Is the machine an instrument of production which tends to" 
displace the laborer, or is it a device which increases his productive 
efficiency? 

4. "The Industrial Revolution brought into a society unprepared 
to deal with them problems of hours of labor, child labor, industrial 
accident, and unemployment." When the machine was introduced, 
why was care not taken to guard against the evil effects which it 
brought? 

5. "The Industrial Revolution took away from the laborer his 
property rights in his trade." Explain what is meant. Do you 
agree? 

6. In speaking of the new industrial system made possible by the 
machine technique Macaulay said: "Nowhere does man exercise 
such dominion over matter." Hammond has transposed the words 
to read: "Nowhere does matter exercise such dominion over man." 
Which statement is true? 

17. National Expressions of Industrialism 

A. In the countries which it has entered modern industrialism 
has produced many common effects. But its introduction has also 
left differences in its wake. For example, the native industrialism of 
England is a thing quite different from the adopted industrialism of 



22 CURRENT ECONOMIC PROBLEMS 

Germany. The industrialism of America, which has been allowed to 
develop to meet the wishes of many men of many minds, is quite 
different from the state industrialism of the Central Empires (that 
were) that had a single clearly defined end. To understand indus- 
trialism aright, we must see something of the varied national influences 
which are associated with it. 

B. Readings 57 and 58. See also 2, 61, 112, 115, 120, 126, 
128, 142. 

C. I. Could Germany have succeeded with the American indus- 
trial system? 2. Why was the machine system introduced into Ger- 
many under the auspices of the state? 3. What exceptions do you 
take to Shadwell's account of American efficiency? 

D. I. Compare the ratios of population and industrial equip- 
ment in America and Germany. What factor has each had to conserve? 
Can you argue that America's waste of natural resources has been a 
means of saving a more valuable commodity, labor? Has Germany 
used its labor as efficiently as America has? 

2. ''England's machine system is less efficient than that of Ger- 
many. England has paid the price that the inventor and developer 
always pays. Germany has secured the rewards of the appropriator." 
Explain in full. Do you agree? 

3. What has England done with the surplus of wealth which the 
machine technique has made possible? America? Germany? Has the 
problem of the surplus been adequately solved? 

4. ''The war has shown that every country is producing a surplus 
of wealth over and above the necessities of its population. In fact it 
was this surplus which supplied the materials with which the war was 
fought. The real problem of reconstruction is to secure the use of 
this surplus which will mean most in the common wealth." Define 
the "surplus." Is the statement above substantially true? If the 
quotation above indicates a problem, state it in more definite terms. 

18. The Extension of Industrialism 

A. The Industrial Revolution is still in process. Industries 
which have long known the machine are using more and more com- 
plicated devices. Industries new to it are feeling its transforming 
touch. The changes which it is destined to effect in our social 



THE INDUSTRIAL REVOLUTION 23 

arrangements have, perhaps, only begun to make themselves manifest. 
Quite as important is the generally neglected extension of the machine 
system. The competition of industrial and non-industrial cultures, 
the victories of the former, the ever-expanding area of the modern 
industrial system, and the reactions of this contact upon the system 
itself are of great current importance and fraught with grave future 
meaning. 

B. Readings 59-62. See also 160, 222, 244, 246, 332. 

C. I. What aspects of Western and of ''primitive" culture are 
coming in contact along the "margin of civilization"? 2. Compare 
in detail the industrial system of the West with that which is being 
established in the East. 3. Of what use is Johnson's distinction 
between "capital proper" and "exploitative capital"? 4. Do you 
accept the argument connecting exploitative capital with war? 
5. Connect Germany's "industrial penetration" with the European 
war. 6. State, as definitely as you can, the effects upon Western 
industrial culture of its ' economic conquest of primitive cultures. 

D. I. Can you associate exploitative commerce with the colonial 
wars of the seventeenth and eighteenth centuries? 

2. A capitalist invests $100,000 in a mine, uncertain as to whether 
he will get anything in return or not. At the end of three years he is 
making $50,000 per year net, or 50 per cent on his investment. It 
appears certain that this rate will continue indefinitely. The ordinary 
return from investments equally safe is 5 per cent. Will the value of 
the property remain $100,000? Will the investor have to continue 
owning the property to get the further returns upon his lucky invest- 
ment? What may he be expected to do? If he sells, what rate of 
return will the purchaser make on his investment? What general 
conclusions are suggested by these questions? 

3. Why did America before the war export so little capital? Why 
are we now exporting so much capital? What political and economic 
import do you attach to the change? 

4. Shall America float large loans to finance European recon- 
struction? Point out the effects of giving and of withholding loans 
upon domestic policies, e.g., those relating to the high cost of living 
and to labor. What is the relationship of this policy to the proposed 
League of Nations? 



24 CURRENT ECONOMIC PROBLEMS 

5. ''In the industrial sections of the world a tendency toward 
uniform prices prevails. In the non-industrial sections prices are 
radically different." Trade between parts of the former area can 
yield profits of what size? between the industrial and the non- 
industrial sections? Why in the latter case is monopoly so essential 
to the traders? What relation has the state to the maintenance of 
such monopolies? Cite historical examples. Of what consequence 
are these things in international affairs? 

6. What, in your opinion, is the relation of the extension of 
industrialism to nationalism? 

7. ''So long as concessions are granted and nations compete to 
bring the blessing of industrialism into primitive lands, there will be 
wars." Can this competition be regulated -by rules? Can inter- 
national arrangements reduce this competition to terms of "law 
and order"? What are the "stakes of diplomacy"? What is the 
"League of Nations" in economic terms? 

8. Will the world eventually constitute a single industrial com- 
munity? 



IV. THE PECUNIARY BASIS OF ECONOMIC 
ORGANIZATION 

19. Price as an Organizing Force 

A. r- Perhaps our most important problem is in the improvement 
of economic organization. Of this many of our current problems, 
such as unemployment and crises, are mere aspects. To understand 
this problem in its many ramifications we must understand the 
institutions which make up the economic order. One of the most 
important, generally overlooked in lay discussion, is price. 

B. Readings: Introduction to IV, 63 and 64. See also 12, 
71-73, 116, 135, 271. 

C. I. What is meant by the ''economic order"? 2. Cite 
examples of your own which indicate the existence of an economic 
organization. 3. Enumerate the problems which would have to be 
solved by a committee which authoritatively set about supplying 
New York with consumptive goods. Could they solve the prob- 
lems? 

D. I. "In place of the disorderly individual effort, each man 
doing what he pleases, the socialist wants organized effort and a 
plan" (H. G. Wells). Is the implication that the present system is 
without organization and a plan correct? 

2. What determines the number of each of the following: civil 
engineers? bank presidents? hod carriers? horses? automobiles? 
potatoes? pounds of sugar? books on economic problems? wheat 
acreage? steelmills? linotype machines? typewriters? Is there any 
system here? 

3. "Price is an industrial barometer. By advancing or falling 
prices producers are warned that society desires more or less of cer- 
tain commodities." Explain with illustrations. 

4. "The whole machinery of buying and selling is simply a con- 
venient means of combining effectively the various factors in pro- 
duction and of assigning the appropriate shares of the product to 
those who have claims upon it." Explain with illustrations. 

25 



26 CURRENT ECONOMIC PROBLEMS 

5. Following the suggestion of Cannan, draw up a report on our 
economic organization for the Association for the Advancement of 
Science of Saturn. 

20. The Organization of Prices 

A. If each price were separate and distinct in itseh, there could 
be no economics. The more important economic problems are 
associated with the fact that our prices constitute a vast, complex, 
and intricate system of mutually dependent items. To understand 
economic organization, we must learn something of what this system 
is and of the influence it exercises over our thought, hves, and action. 

B. Readings 65, 66. See also 68, 93, and 396. 

C. I. Why is it impossible to represent the price system by a 
diagram? 2. Give illustrations of your own of the influence of the 
price system upon the conduct of business. 3. Tell the story of 
the constraints exercised by the price system over your actions in 
the course of a day. 4. What persons are free from the constraints 
of the price system? 

D. I. "Our economic co-operation is regulated through price 
variations." Explain. How much truth is there in this? 

2. ''Money is the incentive to all economic activity." "Because 
money provides the counters which measure commercial triumphs, 
we are likely to go astray in our analysis. Those who play cards 
for cowries are not mastered by a passion for cowries." What is the 
essential difference between these theories of motivation ? Which is 
correct? 

3. Make a comparison between the restraints which the price 
system and the government exercise over individual conduct under 
the following heads: source of power, way in which it is exercised, 
range of activities affected, ease with which decrees are enforced, 
amount of friction involved in enforcement, speed with which changed 
conditions are reflected. 

4. "The content of activity varies, not because human nature 
changes, but because changing institutions infuse a changing content 
into conduct." Account for the difference in behavior between the 
mediaeval gildman and the modern unionist; the feudal lord and the 
modern business man. 



PECUNIARY BASIS OF ECONOMIC ORGANIZATION 27 

5. "The price system causes the less immediate to wait upon the 
more immediate; the more general upon the more particular value. 
Its influence is decidedly conservative." Explain, giving illustrations 
of your own. Do you agree? 

21. Pecuniary Competition 

A. Another institution which plays a prominent part in organiz- 
ing industrial society is pecuniary competition. Through its selective 
tests production is organized, distribution effected, and consumption 
regulated. Its work is effected through the agency of the price 
system. It is no antithesis to co-operation, but the agency through 
which the varied elements of our industrial world are brought together 
into active co-operation. 

B. Readings 67-70. See also 14, 64, 125, 136, 172, 247, 348. 

C. I. Indicate types of competition found under different 
schemes of organizing society. 2. In terms of Cooley's argument 
show how competition organizes college activities. 3. What is 
wrong with Kingsley's conception of competition? 4. Show, by 
illustrations of your own, what is meant by determining ''the plane 
of competition." 5. Can competition itself have an ethical character? 
If not, what is it that is adjudged good or bad? 

D. I. Is there any competition between the engineer and the 
lawyer? the hod carrier and the scavenger? moving pictures and 
ice-cream? a warm dinner and a new lace collar? a piano and a trip 
to Europe? hats and shoes? an unborn child and a new automobile? 

2. What is the basis of competition between college students? 
members of the same ball team? rival shoe manufacturers? economists? 
dramatists? good fellows? society women? settlement workers? May 
the plane of competition be changed in any of these cases? 

3. Is there any competition within an establishment, such as a 
college or a factory? within a monopoly? Would there be competition 
within an industry under socialism? between industries? In which 
of these cases would competition be pecuniary? non-pecuniary? 
What substitute can be found for competition as an organizing 
agency? 

4. "A producer has more control over cost than over selling price. 
He is therefore under constant temptation to use cheap materials, to 



28 CURRENT ECONOMIC PROBLEMS 

underpay labor, and to use unfair methods." Is this temptation 
inherent in the nature of the industrial system? Can you mention 
instances of businesses unable to raise their standards and yet wel- 
coming legislation forcing all competitors to a higher plane? What 
is the point to be made? 

5. "Competition is not law, but lawlessness. In competition, not 
character, but cunning, survives." What confusion exists in the 
mind of the author of this quotation? 

6. "It is only through competition that the price system can 
cause the limited resources of society to be used in such a way as to 
produce goods of proper kinds and in proper quantities to afford 
society the maximum of utilities." Make this intelligible. Do you 
believe it? 

22. Price-Fixing by Authority 

A. Prices are the products of a myriad forces which express 
themselves through competition. As organizing agents they lead to 
k myriad of consequences, near and remote. But we may not like 
them; their consequences may fail to satisfy us. In such cases is it 
possible to set them aside and substitute others more to our liking? 
Before the war most of us would have answered this question in the 
negative. During the war we made use of many price-fixing devices. 
In general we can not as yet give an absolutely affirmative answer to 
the question; but we are less sure of the negative answer than once 
we were. 

B. Readings 71-73. See also 121, 125, 270-72, 274, 350, 361- 

C. I. Why could not the provisions of the Statute of Laborers 
be enforced? 2. How is "right and proper" price to be determined? 
3. Give examples of each of the methods of price-fixing during the 
war mentioned by Clark. 4. What current projects of reform 
involve price-fixing? 5. Why was the fixing of the price of sugar 
during the war successful? Or was it? 

D. I. Show by citing a concrete example, say that of the fixing 
of the price of wheat during the war, that price-fixing is a regulation 
of production, of distribution, and of consumption. 

2. Cite as many examples as you can of price-fixing by custom or 
authority. How are these to be explained? Account for the fact 



PECUNIARY BASIS OF ECONOMIC ORGANIZATION 29 

that the prices of so many of them have been changed since the 
beginning of the European War. 

3. Do you favor a retention in time of peace of governmental 
control of the prices of basic food commodities, such as flour, meat 
and sugar. Why? Do you favor similar control of the prices of 
the standard raw materials of production, such as coal, pig-iron, etc.? 

4. Why do modern states attempt to regulate the rate of interest, 
but make no similar attempt to regulate wages? 

23. The Function of the Middlemen 

A. Is the pecuniary organization of society which has been dis- 
cussed an economic one? Do pecuniary rewards and useful functions 
always go together? To take a single example, it has long been 
insisted that "middlemen" are "parasites," that "they love to reap 
where they have not sown." An analysis of their functions shows 
that we could not easily get along without them. That we could not 
get along with fewer of them is not so clear. 

B. Readings 74-77. 

C. I. Were the "forestallers" condemned by mediaeval statute 
and by Washington analogous to our "middlemen"? 2. Make a 
general statement of the functions of the middleman. 3. Would 
there be middlemen in a socialistic society? 

D. I. "Farmers, miners, fishermen, and manufacturers have 
long been considered producers. But productivity was long denied 
to the services of ministers, teachers, musicians, buffoons, and skirt 
dancers." What conception of wealth was at the bottom of the 
distinction? It is correct? 

2. "The seller of cut-glassware frequently makes 100 per cent on 
his merchandise; druggists not infrequently sell prescriptions at an 
advance of 200 to 300 per cent upon the cost of the raw materials 
going into them." Do these percentages in themselves indicate 
excessive gains? 

3. A man who had paid $8 for a barrel of apples found inside 
this note: "Dear Consumer: I was paid $1.70 for this barrel of 
apples. How much did you pay? Producer." Is there evidence 
that either producer or consumer was cheated? Of what does there 
seem to be evidence? 



30 CURRENT ECONOMIC PROBLEMS 

4. ''The high prices made possible by an agreement among 
retailers yield large profits which draw others into the business. In 
the end no merchant is getting an excessive return, but a much larger 
amount of capital is invested and a greater number of merchants 
are employed than the services to be performed warrant." Does 
your observation bear out or refute this conclusion? 

24. Speculation 

A. Those who insist that in our society pecuniary rewards may 
be wholly dissociated from services bring a second indictment, this 
time against the speculator. The charge against speculation is more 
serious than that against merchandizing. The recent agitation against 
''dealing in futures" makes timely, as well as pertinent, an examina- 
tion of. the place of speculation in the organization of industrial life. 

B. Readings 78-83. See also 91, 92, 95, 112, 248. 

C. I. Distinguish, as clearly as possible, between investment, 
speculation, and gambhng. 2. By illustrations show that the stock 
and produce exchanges are markets. 3. Point out the functions 
which each perform. 4. Draw up a glossary of terms used in specu- 
lation. 5. In terms of a hypothetical illustration explain step by 
step a typical speculative transaction. 6. Draw up a system of 
accounts covering the transactions mentioned by Stephens. 7. Give 
examples of "manipulation" of the market. 8. What features of 
speculative activity do you regard as good? as bad? 

D. I. Draw lines between investment, speculation, and gambling 
in the following group of instances: buying a share of stock with the 
intention of keeping it and actually keeping it; buying it with the 
intention of keeping it, but disposing of it because of an unexpected 
increase in price; buying it with the object of keeping or disposing of 
it according to circumstances; buying it for cash with the object of 
selling it soon at a profit; buying it on the margin with the object 
of selling at a profit. 

2. Did you ever take a difficult course and hedge with an easy 
one? Give as many examples as you can of practices analogous to 
hedging. 

3. "Speculation in wheat tends to lower the price of flour without 
lowering the price of wheat." Show how this comes about. 



PECUNIARY BASIS OF ECONOMIC ORGANIZATION 31 

4. "Speculation tends to lower the price of wheat by an addition 
of a paper supply sold by the bears." What fact is overlooked? 

5. Show how speculation assists in establishing a single price in a 
single market. How comprehensive does it tend to make that 
market? Show how this price acts as a guide to production. 

6. "The stock exchange, that delicate register of values, that 
sensitive governor of production, that acute barometer of the people's 
needs, could not be replaced by any process that any state socialist 
ever devised or suggested" (Conant). Explain each of the phrases 
above. What is the relation of speculation to the pecuniary 
organization of industry? For the performance of these functions 
what substitute can you suggest? 

7. Draw up a legislative program which will strip speculation of 
"manipulation" and gambling and will leave it as free as it is at 
present to perform its proper economic functions. 

25. The Corporation 

A. In connection with the price system, competition, and the 
market it is necessary to take account of one other institution, the 
corporation. Superficially the corporation seems to involve a question 
of the form of the organization of the business unit. Basically, how- 
ever, it performs important functions in the larger task of organizing 
investments, management, and labor into productive combinations. 

B. Readings 84-87. See also 88, 92, 170, 209, 390. 

C. I. Draw up a glossary of the terms of corporation finance 
used in these readings. 2. What are the advantages to the corpora- 
tion of issuing different classes of securities? 3. What are the 
advantages to the investor? to the public? 4. Is the management 
necessarily acuta ted by the pecuniary interests of the owners? 5. Is 
the welfare of the corporation dependent upon services to the public? 
6. Show how the corporation encourages savings and increases the 
productivity of capital. 7. Does the corporation increase the 
productivity of labor? of managing ability? 

D. I. Draw up a scheme for the issue of corporate securities 
that will throw control of the business into the hands of those who 
will take long chances; into the hands of those who will play safe. 

2. "In a corporation the interests of the owners, the manage- 
ment, and the public are out of harmony. These conflicting interests 



32 CURRENT ECONOMIC PROBLEMS 

give rise to several very troublesome problems." Enumerate and 
illustrate the various types of conflict that may arise. How is owner- 
ship to be protected against management? against the public? , How 
is the public to be protected? 

3. "The policy of a corporation is made by the management, not 
by the owners. To secure efficiency a scheme of incentives must be 
developed which will appeal to the former. The use of higher profits 
as an incentive is useless, for its appeal is to those who do not control 
policy." How much truth is there in this statement? 

4. ''The existence of the corporation imparts fluidity to the various 
factors of production and permits them to be used in the most efficient 
combinations." Show by illustration how the corporation utilizes 
most efficiently business ability, capital, and labor. 

5. ''The corporation acts as an insurance against risk and stimu- 
lates investment in new enterprises." Enumerate and illustrate the 
functions performed by the corporation in industrial development. 

6. Is there any causal connection between the corporation and 
the concentration of wealth? the stratification of society? the appear- 
ance of a leisure class? 

26. The Organization of Trades 

A. It is impossible at this point to make a study of all the insti- 
tutions which contribute to the pecuniary organization of society. 
It has been found necessary to treat even such important agencies as 
the family, the trade union, property, and contract elsewhere. But 
to give a semblance of completeness to this part of our study one other 
question must be raised. We must look into the problem of how 
establishments are articulated into industries and how these industries 
are bound together into an industrial system. Here the inquiry is 
how economically this pecuniary organization administers the limited 
resources of society. 

B. Readings 88-90. See also 3, 63, 91, 96, 114, 385, 396. 

C. I. Show that competition and association are complementary 
aspects of economic organization. 2. Give examples of comple- 
mentary trades. 3. Show, by examples of your own, how changes 
in one trade affect many others. . 4. What is meant by the "con- 
trolling power of demand"? Does demand actually guide production? 
5. In its larger outlines is the industrial system adequately organized? 



PECUNIARY BASIS OF ECONOMIC ORGANIZATION S3 

D. I. "Demand, acting through the price system, secures such 
an apportionment of our hmited productive energy between various 
trades as to secure various goods in just such proportions to each 
other as to give to society the maximum of utiHties." Explain this 
theory in full. Do you accept it? 

2. Are goods produced to meet a demand, or is a demand arti- 
fically built up in order that goods can be sold? Which has the 
greatest control over what goods shall be produced and in what 
quantities, demand, ownership of means of production, or manage- 
ment of production? 

3. Why, during the war, did the government find it desirable to 
deal with industries as industrial units, rather than to deal with the 
several corporations making them up? Could the government, by 
using the customary device of bidding, have gotten just those goods 
produced which it required, and just the quantities desired? 

4. ''If we had an adequate organization of industries, we could 
insure a more economic use of the materials of production, a more 
adequate utilization of labor, and a much more prompt and efficient 
adoption of the latest improvements in machinery and processes." 
Elaborate the case for an organization of industries. What argu- 
ments are to be advanced against it? 

5. "Until the industries of the country are adequately organized, 
it will be impossible to hold them to their responsibilities to the com- 
mon wealth." Develop this argument. 

6. "So long as labor is organized along trade, and not along 
industrial, lines, it will be impossible to build up a labor morale on 
the principle of labor's responsibility for full and efficient production." 
Why is American labor organized along trade lines? Can an industrial 
organization be secured? Will it give the advantages claimed for it? 

7. One of seven competing grocers advertises in the newspapers. 
Does it pay him immediately? What will the other grocers do? In 
the end how much better off will anyone be? When the custom has 
become established, can a grocer cease advertising? The costs of 
advertising will eventually be borne by whom? Does competition 
tend to raise or lower the costs of production? 

8. For the purposes of an economic program would you make a 
distinction between standard commodities and specialties? 



V. PROBLEMS OF THE BUSINESS CYCLE 
27. The Delicate Mechanism of Industry 

A. In its long-time aspects the problem of economic organization 
is complicated by two characteristics of the industrial system. First, 
goods are being produced in anticipation of demand for an unknown 
future market. This market may disappear before the process is 
complete, causing financial loss to the producers. Second, trades, 
prices, and credits are tied together into a closely articulated and 
extremely sensitive system. By reason of this the financial disaster 
mentioned threatens to become quite general. 

B. Readings: Introduction to V, 91-94. See also 65, 78, 90, 248. 

C. I . Show by definite examples the unknown factors in the prob- 
lem with which "business enterprise" grapples. 2. Give examples of 
the most important lines of price relationship. 3. Explain the 
"sensitive mechanism of credit" by beginning at a point other than 
that at which Moulton begins. 4. Enumerate the elements making 
for and against the "planlessness" of production. 5. Why is the 
organization of our productive system subject to periodic disturbance? 

D. I. Compare the problems of efficient economic organization 
under the manorial system and under modern industrialism. If goods 
were produced to order, would modern crises and depressions appear? 

2. "The lack of a well-co-ordinated system of control makes 
industry resemble, at present, a mob rather than an army." Upon 
what do we depend for a correlation of industrial units? Is the 
dependence well placed? 

3. What is the connection between the "roundabout" process of 
production and fluctuations in trade? 

4. Connect the complicated mechanism between producer and 
consumer and that between accumulators and investors of capital 
with periodic disturbances in industry. 

5. "Under our present system a course of error may be persisted 
in for a considerable period without retribution." Illustrate. What 
is the result when retribution finally comes? 

34 



PROBLEMS OF THE BUSINESS CYCLE 35 

6. ''Our present system permits the accumulation of debts up to 
the point where they can no longer be carried and a general collapse 
must follow." How is such an accumulation possible? Why does 
the collapse come? 

28. The Economic Cycle 

A. The most conspicuous disturbances to which the industrial 
system is subject, such as crises and depressions, have long been 
noted. Only recently, however, have economists come to see that 
there is a persistent variation in the volume of business, and to 
elaborate a theory of the "economic cycle." 

B. Readings 95 and 96. See also 112, 250, 253, 372. 

C. I. What characteristics of modern industrial society make it 
sensitive to shock. 2. What relation has demand to sensitiveness to 
shock. 3. Beginning with "flush times" give Mitchell's explanation 
of the course of the cycle. 4. What advantages has the newer 
theory of "economic cycles" over the older one of "crises"? 

D. I. Account for the growing tendency to treat crises as an 
aspect of the general industrial system rather than as a mere phase 
of the financial system. 

2. "Crises could not occur at regular intervals." If it were well 
known that a crisis was destined to appear at a certain time, how 
would men act? In view of this activity could the crisis appear? 

3. Using an economic history of the United States for data, 
write a short history of "Economic Cycles in America." 

4. Account for the extreme rhythm of business activity in America. 
What has been the relation of railroad-building to the extreme sweep 
of the cycle? 

5. What place has each of the following in the theory of the 
economic cycle: money economy? time-consuming methods of pro- 
duction? accumulation of new capital? development of technique? 
application of machine technique to our continent? extension of 
industrialism? world-wide markets? war? fashion? 

6. "Crises have no one sole and sufficient cause. They arise out 
of the economic situation as a whole." State, with adequate detail, 
why you agree or disagree with this statement. 



36 CURRENT ECONOMIC PROBLEMS 

29. The Course of a Crisis 

A. Crises are alike and they are different. There is something 
of uniformity in the courses which they take; there is, also, much of 
individual variation. These characteristics, important as they are to 
the theory of the economic cycle, can best be shown by a comparative 
study. 

B. Readings 97-100. See also 109, 132, 151. 

C. I. What criticism can you make of Lough's criteria for sizing 
up an industrial situation? 2. Give an account of the general con- 
ditions out of which the panic of 1907 came. 3. What is the relation 
of capitalistic monopoly to the rhythm of business activity. 4. Do 
you accept Hadley's statement of the order of events in a crisis? 

D. I. One of the fundamental conditions leading to a crisis is 
an improper balance between capital tied up in long-time and short- 
time processes. Explain, giving examples. 

2. From all the evidence at your disposal draw up a list of the 
general conditions out of which crises arise. Arrange these in the 
order of their importance. 

3. "The usual sign for the beginning of a crisis is a conspicuous 
banking or mercantile failure." Shall we substitute "cause" for 
"signal"? Shall we substitute "universal" for "usual"? 

4. Show quite definitely how a crisis affects the activities and 
wehare of the laborer, the farmer, the manufacturer, the banker, the 
merchant, the exporter, the government employee, the professional 
man, the funded income recipient, the real-estate owner. 

5. "The extension of our machine system is the primary cause of 
crises. It diverts more and more of our productive resources from 
the production of 'staples' to the production of 'specialties.' Thus 
more and more goods are produced for an uncertain and capricious 
market." Present this argument more fully. In what other ways 
may the machine technique be regarded as a contributory factor in 
crises? 

30. Industrial Conditions During a Depression 

A. The depression has never received the attention warranted 
by the importance of its place in the cycle. Its literature is very 
meager. We know that in nature it is a disorganization of the 



PROBLEMS OF THE BUSINESS CYCLE 37 

structure of the industrial system. Some of the details of this dis- 
organization can be gathered from the readings presented in Current 
Economic Problems. For a more adequate account the student is 
referred to the periodical literature of a period of depression. 

B. Readings loi and 102. See also 132, 250, and the Intro- 
duction to XI. 

C. I. Distinguish between a crisis and a depression; a panic 
and a depression. 2. May any one of these occur independently of 
the other two? 3. What are the best standards for measuring the 
volume of business activity? for measuring the volume of production? 
4. State the characteristics of a depression. 

D. I. Trace out as accurately as you can the transition from 
the crisis of 1907 to the depression which followed. 

2. From the material available in industrial and financial periodi- 
cals determine the status of production during the winter of 1907-8. 
What were the characteristics of economic organization during this 
period? 

3. 'Tn a depression the prices of some commodities are too high. 
The tension could be relieved and all our productive equipment could 
be put to work if these prices were lowered." Show the miscon- 
ception of the nature of a depression which underlies this statement. 

4. "In a depression manufacturers have equipment with which to 
produce goods, merchants have the facilities for selling them, and 
consumers have need for them. Everyone needs full production and 
everyone is willing to do his part to secure it." Then why is it that 
production remains below normal? 

5. 'Tn a depression it is to the interest of a manufacturer that 
other manufacturers keep their full forces of labor employed and 
that they do not reduce wages." Why? 

6. Formulate a plan for avoiding the losses which inevitably 
accompany a depression. 

31. War and the Cycle 

A. Modern war, with its enormous governmental orders, stimu- 
lates "flush times." While it checks activity in some lines of trade 
it stimulates production in many others. Yet not all the gain of 
war is genuine. On the whole, prices advance faster than incomes, 



38 CURRENT ECONOMIC PROBLEMS 

much industrial equipment is converted to temporary uses, and a 
great deal of product is secured at the expense of permaturely using 
up human and material resources. 

B. Readings 103-7. See also 116, 130, 132, 190, 268, 314, 357. 

C. I. Make a list of the various industries which are referred to 
in the readings. 2. Study each under the following headings: 
essential or non-essential, demand for product, labor supply, raw 
materials, production. 3. From these readings what conclusions do 
you reach about industrial and financial conditions during a war? 

D. I. "During the. war the demand for many goods was in 
excess of the supply." How do you account for this? Why were 
not demand and supply properly adjusted to each other ? 

2. By the use of a graph trace the rate on call loans in the New 
York market during the war. Account for the changes. 

3. Trace the course of the rate of exchange on London month by 
month during the war. Account for the change. 

4. From the material given in the price bulletins issued by the 
War Industries Board trace out the course of production and of prices 
of some staple commodity during the course of the war. 

5. What is a "key industry"? What is a "hmiting factor"? 
Why were these expressions so infrequently used before the war? 
Why were they so habitually employed by those who were charged 
with the administrative problems of the war? 

6. What general conclusions about the nature of the industrial 
system and the organization of production are offered by the materials 
covered in this lesson? 

32. Control of the Industrial Cycle 

A. At last we reach the real problem of the business cycle. Is 
it desirable that an attempt be made to control the rhythm of business 
activity, and through it the pecuniary organization of society in its 
long-time aspects? If such control is desirable, is it possible? If 
possible, what are the proper ways and means? In formulating a 
program, if such be attempted, let us not forget that it must have 
its basis in the theory of the nature of the cycle which our analysis 
has revealed. It must be grounded upon fundamental, not super- 
ficial, considerations. 



PROBLEMS OF THE BUSINESS CYCLE 39 

B. Readings 108-12. See also 2, 96, 132, 253, 384. 

C. I. State as clearly as you can the fundamental conditions 
leading to the rhythm in business activity; the essential character- 
istics of the cycle. ■ 2. Enumerate the "remedies," proposed in the 
readings or elsewhere, which merely "treat symptoms." 3. What 
proposals can be garnered from the readings for use in a program 
dealing with fundamental conditions? 4. Is the "severity of the 
trade cycle" a price which the United States must pay for rapid 
industrial development in the future? 

D. I. "The greatest of our economic problems is that of elimi- 
nating the extreme rhythm of business activity. It is to prevent the 
overutilization of human and material resources during 'flush times' 
and their underutilization during periods of depression. This larger 
problem of economic organization as yet remains unsolved." Show 
quite specifically the importance of the problem. Why is it a prob- 
lem of "economic organization"? 

2. Make a calculation in pecuniary terms of the economic losses 
due to the rhythm of business activity in the United States from 1890 
to the present. Enumerate losses which cannot be reduced to 
pecuniary terms. 

3. "During a period of depression the government should put 
through its projects for the construction of public work." What 
arguments can be suggested in favor of this policy? What theo- 
retical objections can be urged against it? What practical obstacles 
would have to be overcome in its administration? 

4. "The most troublesome of the problems usually included under 
the head of 'unemployment' is inseparably connected with the busi- 
ness cycle." What have you learned about how the problem of 
"cyclical unemployment" cannot be solved? Have you any positive 
suggestions to make for its solution? 

5. "Crises and depressions together eliminate from the industrial 
world unsound business units. It is through them that the survival 
of the fittest becomes industrially effective." Do you agree? 

6. "Crises and depressions are the price which a highly industrial 
state pays for its progress." Is this statement true? Can this and 
the statement above both be true? 



40 CURRENT ECONOMIC PROBLEMS 

7. ''The slowing up of development within a nation offers no 
immunity from the disturbances originating in expanding industry. 
Such slowing up is always accompanied by the export of capital to, 
and the import of securities from, the undeveloped parts of the world. 
Such parts are thus made an integral part of the national economic 
system, and disturbances originating there affect the domestic indus- 
trial system." Is this conclusion valid? In its light criticize the two 
statements immediately preceding and the conclusions in 132 and in 
the last paragraph of the introduction to V. 

8. Formulate a program for securing a more adequate pecuniary 
organization of industrial activities, considered in their long-time 
aspect. 



VI. THE PROBLEM OF ECONOMIC ORGANIZATION 

FOR WAR 

33. The Nature of Modern War 

A. Like all other things, war has been profoundly modified by 
the machine process, the price system, and the other institutions 
which make up modern industrialism. The prosecution of a success- 
ful war engages the energies of all sorts and conditions of people. 
Recent experience has shown that all are quite willing to aid in the 
prosecution of the war. It has also shown that well-intentioned 
endeavor has frequently been misspent because of an ignorance of the 
nature of modern war and its requirements. With this question a 
study of "the economics of war" properly begins. 

B. Readings: Introduction to VI, 113-15. See also 61, 62, 
103-69, 7,256, 262, 310. 

C. I. What is "the economics of war"? 2. List the more 
importa.nt of the economic antecedents of war. 3. Explain, using 
illustrations, economic organization for war. 4. Show the dependence 
of war upon "the state of the industrial arts." 5. Indicate the 
importance of the element of time in preparation for war. 6. Give 
examples of your own in explanation of "the larger economic 
strategy." 

D. I. From the assigned and supplementary readings, and other 
sources, make a hst of the "causes" of modern wars. Distribute a 
total of 1,000 points between the items in your list in terms of the 
importance of their contributions to war. 

2. In the technique of modern war find analogies to the machine 
technology, the factory system, large-scale . production, and other 
devices of industrialism. 

3. What aspects of the technique and organization of war are 
survivals from a pre-machine age? 

4. By illustrations show the relation of each of the following to 
the technique of war; increase of scientific knowledge; the national 
system of pubHc finance; the habits and customs of the people; the 

41 



42 CURRENT ECONOMIC PROBLEMS 

kinds of natural resources and their quantities; lack of serious internal 
troubles; susceptibility of the people to discipline. 

5. How is preparation for war to be made in a society composed 
of self-sufficient agricultural communities? an industrial society 
using machines and the price system ? a society using machines but 
not using the price system ? 

34. The Sinews of War 

A. Modern war requires vast quantities of human and material 
resources. The men must be trained in a peculiar technique. The 
materials must be fashioned for a particular purpose. The quantities 
of a large bill of goods must be proportioned to each other with more 
or less accuracy. Usually a nation has not been able to make ade- 
quate preparation in time of peace. When war comes, the task of 
reorganizing industry to meet the new need has to be pushed through 
against time. 

B. Readings 1 16-19. See also 48, 52, 215, 301, 355, 369-71. 

C. I. What is involved in ' 'preparation for war"? 2. What 
problems of preparation are most easily and most adequately solved? 
3. When did Germany begin preparing for the war which has just 
closed? 4. Why is it so important in war to economize man-power? 
5. Point out the contributions of several of the natural sciences to 
efi&ciency in war; of several of the social sciences. 

D. I. "The army which engages the enemy is the cutting edge 
of a great and complex machine, which ramifies to the utmost confines 
of the land, includes the activities of all sorts and conditions of men, 
and depends for its speed and efficiency upon the everyday habits 
and activities of ordinary people." Explain, with illustrations, each 
of the last three clauses. 

2. Make a list of the various war boards organized in Washington; 
point out the function of each of these boards. On this basis draw 
up a statement of what is involved in the problem of preparation 
for war. 

3. What was the proper object of the Food Administration during 
the war: to conserve the existing supply of food? to prevent industrial 
unrest by keeping down the prices of staple commodities? to stimulate 
their production by putting prices up? to divert production from 



ECONOMIC ORGANIZATION FOR WAR 43 

specialized to staple products by making the latter relatively more 
profitable? or something else? 

4. Show the influence of Germany's isolation and England's con- 
tact with neutral countries upon the economic policies of the two 
nations during the recent war. 

5. '^It is almost impossible for a nation to make adequate prepa- 
ration to engage in a Wcir with another nation possessed of equal 
resources. An advantage can be secured by more adequate prepara- 
tion. But if one nation prepares, the other will follow, leaving the 
first nation just where it was." Show that preparation for war is 
competitive. What bearing has this fact upon the problem of 
international relations? 

35.- Methods of Industrial Mobilization 

A. So long as nations pattern their organizations after different 
models, they will prepare for war in different ways. If the war is 
with a weak nation, the manner of preparation does not particularly 
matter. But, under the tyranny of the modern technique, no nation 
can afford to make mistakes in getting ready to meet another nation 
equally powerful. For the purpose a high national morale and a 
centralized control giving direction to the various elements of organi- 
zation are indispensable. 

B. Readings 120-25. See also 58, 64, 164, 188, 189, 304, 320, 
322, 361. 

C. I. What elements of injustice and inefficiency attach to 
voluntary army recruiting? 2. Why cannot we count upon a volun- 
tary enlistment of factories for national purposes in war time? 
3. Explain the nature and use of a scheme of priorities. 4. State the 
arguments for and against industrial conscription. 

D. I. Why in time of war does public opinion sanction the con- 
scription of men for military purposes but not for the production of 
the sinews of war? Why does it approve the conscription of men but 
not the conscription of income or of industrial equipment? 

2. Why did the government permit the advertisement of stand- 
ardized commodities, of which there was a deficit, in war time? Why 
did it not send to jail, for seriously interfering with industrial enlist- 
ment, those who tried to persuade the public to purchase non- 
essentials? 



44 CURRENT ECONOMIC PROBLEMS 

3. ''Our experience in war has shown that the problem most 
easily and quickly solved is that of securing an army. The most 
difficult problem is an adequate supply of munitions, without which 
an army is impotent." What bearing has this statement upon a 
program for military preparedness? 

4. "By some it has been argued that the industrial system can be 
made to produce a surplus above its present product adequate to the 
needs of the war. By others it is insisted that the surplus can be 
produced only by diverting instruments from the production of non- 
essentials to the production of war materials." If the former state- 
ment is true, how can a nation be best organized for war? If the 
latter statement is true, how is organization to be effected? Which 
statement is true? 

5. If a nation during war can increase its product by a surplus 
large enough for war purposes, what does this indicate about the 
customary degree of efficiency with which industrial resources are 
utilized? Translate into terms of specific problems of peace-time 
organization. 

36. Mobilization in Liberal Countries 

. A. Those who suggested securing the good of all by allowing 
each to follow his own pecuniary interests did not have in mind the 
common good which attaches to the successful issue of a modern war. 
Nations which have followed their precepts quite literally have as a 
result been confronted by serious problems in the organization for 
war which other nations have escaped. The great war asset of 
liberal countries has been resourcefulness and morale. The great 
liability has been ignorance of economic organization and lack of 
co-ordination of effort. 

B. Readings 126-30. See also 14, 17, 24, 57, 268, 311, 393. 

C. I. How has the new technique penalized those who have 
developed it? 2. Give examples of your own of social customs which 
have helped or hindered effective organization for war. 3. Account 
for the many appeals to "spend" which were common during war 
time. With what "drives" did they most interfere? 4. Cite evi- 
dence of the degree of curtailment of nonessentials in your community 
during the war. 



ECONOMIC ORGANIZATION FOR WAR 45 

D. I. ''During the war we needed no elaborate machinery of 
control at Washington. Without it the government could have had 
all its demands satisfied. All it had to do to secure the goods it 
wished was to bid enough to make it profitable for individuals and 
corporations to produce them. The good old-fashioned law of supply 
and demand was quite adequate for the purpose." Just exactly 
what is "the good old-fashioned law of demand and supply"? Could 
the government in the proposed way have gotten as large supplies 
as it needed? Could it have secured them in the proper proportions? 
Could it have secured them at the right time? 

2. "The inadequacy of mere bidding up to secure governmental 
supplies was shown by the failure of the labor policy in vogue during 
the first few months of the war. During this period each of the 
governmental departments was left free to secure its labor as it saw 
fit. The result was that the various boards, by bidding for a quan- 
tity of labor insufficient to satisfy all their needs, took laborers away 
from each other, raised wages to exhorbitant figures, and greatly 
increased the labor turnover." Explain this argument fully, citing 
evidence which has come under your observation. 

3. "In war a government cannot use the device of getting what 
it wants by paying for it as efficiently as a private corporation can 
use it. The corporation is restrained by the necessity of selling goods 
at a profit from bidding too high for materials. . The government 
feels no such restraint." Explain. 

4. "The precept to pay enough to get the goods you want was 
never intended to apply to the government's needs in a world- war. 
Their satisfaction requires a radical reorganization of the industrial 
system within a short space of time. It is only through gradual 
modification and during an extended period that the industrial sys- 
tem responds to a changing demand." Explain in full. Does this 
mean that classical economics has no lesson for the nation at war? 
Does it mean that it is adequate to the problem of organization 
for war? 

5. "If the war has proved anything, beyond perad venture it is that 
the system of business enterprise in vogue at the present time is woe- 
fully inadequate to the task of organizing our resources for war." In 
establishing our system of business enterprise was it ever intended to 



46 CURRENT ECONOMIC PROBLEMS 

prepare the nation for war? Are business enterprise and organization 
for war incompatible? 

37. Getting Out of War 

A. After war come the many problems lumped together under 
the all-inclusive head of reconstruction. Clearly this term includes 
demobilization of men, of equipment, and of materials. It also 
includes a return of all the baffling problems of peace, complicated 
by the physical problem of getting out of the war and the psycholog- 
ical problem of building up a morale actuated by the ideals of a 
nation at peace. 

B. Readings 131-33. See also 244-46, 306, 322, 329, 359-65, 
382-87, 400, 404. 

»C. I. Connect the rate of demobilization with the re-establish- 
ment of the industrial system upon a peace basis. 2. Why is the end 
of a war always attended by danger of a slump in production? 
3. With what problems previously discussed is the problem of the 
maintenance of the level of production to be classed? 4. Name and 
illustrate the psychological factors which tend to make the problem 
of reconstruction difficult. 5. Enumerate the various problems which 
together make up the comprehensive problem of "reconstruction." 

D. I. "The problem of reconstruction we have with us always." 
Why? 

2. "The great service of the war was the revelation of short- 
comings in the present economic structure. The great problems of 
the adaptation of the industrial system on one hand to the machine 
process and on the other to the demands of human nature have not 
yet been solved. But, thanks to the war, they can be stated with 
fair precision." State these problems. 

3. "The war has shown that industry is an instrument to be used 
for social purposes, that business is a mere scheme of administering 
industry, and that both of these are subject to control." Explain 
each of these three clauses. What is the importance of this statement? 

4. "Compared to the problem of an economic organization of a 
nation's resources, the problem of preparation for war is simplicity 
itself. The latter has a clearly defined end and technique translates 
this end into a bill of particulars. The solution of the peace problem 



ECONOMIC ORGANIZATION FOR WAR 47 

is contingent upon an end and a program." Explain this more 
fully. How is the end to be attained in peace to be determined? 
How is it to be translated into a program? 

5. ''The problem of reconstruction is bound up with a clash 
between the immediate interests of individuals and of groups, between 
the present and the future interests of these groups, and between the 
desires of the groups and what is good for society as a whole." In 
terms of some problem of "reconstruction" illustrate each of these 
conflicts. 

6. ''To hold the balance true between the material and the human 
values of life is the oldest and the newest economic problem." With 
this as a text write a homily that is good for men to read at the 
present time. 



VII. THE PROBLEM OF INTERNATIONAL TRADE 

38. The Basis of International Trade 

A. We have studied at some length, both in their immediate and 
in their long-time aspects, the problems involved in the pecuniary 
organization of society. There remains for discussion the territorial 
limits of the economic order. Shall the industrial system be left free 
to organize itself on pecuniary lines, irrespective of local, class, group, 
or political interests? Or, should such organization be subordinated 
to, or restricted by, such interests? We can best begin this study by 
determining what basis there is for a comprehensive pecuniary organi- 
zation that transcends political and social lines. 

B. Readings: Introduction to VII, 134-38. See also i, 59, 64, 

C. I. Connect the problems of international trade with the 
problems of the pecuniary organization of society. 2. Make a classi- 
fication of the advantages of international trade upon some other 
basis than that of importation and exportation. 3. Make an appli- 
cation of the law of comparative cost to the relations of individuals; 
of economic groups; of nations. 4. State, with illustrations of your 
own, the "theory of free trade." 5. Show how the use of money in 
foreign trade is reduced to a minimum. 6. Can there really be such 
a thing as a "balance of trade"? 7. During the war what "invisible 
imports" were brought into the United States? 

D. I. Why should an effort be made to place territorial rather 
than religious, cultural, or class restrictions on trade? 

2. In a mediaeval sermon occur these sentences: "The third 
are such as are busied with trade; we cannot do without them. They 
bring from one kingdom to another what is good cheap there, and 
whatever is good cheap beyond the sea they bring to this town, and 
whatever is good cheap here they carry over the sea." What theory 
of international trade underlies these statements? 

3. "International trade may be based upon differences in {a) 
natural resources, {h) technical systems, (c) proportion between popu- 

48 



THE PROBLEM OF INTERNATIONAL TRADE 49 

lation and industrial equipment, (d) native capacities of the peoples 
or (e) traditions of workmanship." Upon what other differences may 
it rest? Mention examples of trade resting upon each of these 
differences. Upon what differences does the trade between the United 
States and foreign countries rest? 

4. "Every year we pay millions to Great Britain for carrying 
goods between this and foreign nations. Think of it. Millions on 
millions in gold coin have been transferred from our coffers to those 
of England. How long can we stand this?" Do we pay England in 
gold for carrying our goods? How do we pay? Is it necessarily true 
that we should be richer if we built ships and carried the goods 
ourselves? 

5. "In Cuba the costs of producing olives and bananas are as 
7:3; in Greece they are as 1:19." Will trade between the two coun- 
tries pay? Which will export bananas? If Cuba has an advantage 
over Greece in the production of each of the commodities, will 
exchange pay? 

6. "I have it, on the authority of government statistics, that our 
losses in trade with South America, through an excess of imports 
over exports, have exceeded the cost of the Civil War. The South 
Americans have thus received billions of dollars' worth of goods at 
our expense." Prove, by a similar argument, that we have obtained 
billions of dollars' worth of goods at England's expense. 

7. "To the extent that the domestic market is wrested from 
foreigners and given to protected home producers, the foreign market 
is wrested from unprotected home producers." Demonstrate. 

39. The Perenniel Argument for Restriction 

A. The case for protection can be clearly appraised only when a 
clear distinction is made between valid social interests and the inter- 
ests of particular individuals, groups, or localities masquerading as 
social interests. A study of the demand for local protection serves 
to reveal the nature of the latter interests by revealing them 
unmasked. It has the added advantage of showing that, where the 
government cannot be used, there are many other social agencies 
which can be made to serve a pecuniary purpose. For it is easy to 



50 CURRENT ECONOMIC PROBLEMS 

translate particular into general interests, and few institutions have 
supporting them a larger number of honorable and venerable argu- 
ments than restriction. 

B. Readings 139-44. See also 28, 37, 129, 169, 232, 291. 

C. I. What function is erroneously attributed to money in the 
arguments for keeping trade at home? 2. Are these arguments sound 
from the standpoint of the interested parties? of communities repre- 
sented? of the larger industrial entity? 3. What valid arguments 
can be advanced in favor of patronizing home industries? 4. What 
arguments supporting restriction aim at a protection of vested 
interests? an advancement of dynastic or national interests? 
5. Using examples of your own, write an essay upon ''The Seen and 
the Unseen." 

D. I. "If Massachusetts were allowed to levy a protective tariff, 
it could add to its huge aggregate of industries a great banana indus- 
try." Could Massachusetts through protection build up a banana 
industry? Would this constitute a net addition to the wealth of the 
state? 

2. Before the adoption of the United States Constitution the 
state of New York levied a protective duty on firewood shipped 
into the state from Connecticut. Did it act wisely? If there were 
no constitutional restrictions, would you expect the states of the 
Union now to levy protective duties against each other? the towns? 

3. "The imposition of restrictions on trade, either through govern- 
mental authority or the creation of popular prejudices, interferes with 
a thoroughgoing division of labor and the organization of industrial 
society on the most comprehensive plan." Do you agree? 

4. "The inhabitants of small towns are short-sighted in patron- 
izing mail-order houses. There are some articles of imperative 
necessity which they must purchase from local merchants. Such 
merchants, with the whole of the retail trade of the towns, barely 
manage to maintain themselves. If, then, they are denied a part of 
this trade, they must eventually go out of business. Then the 
inhabitants of the towns will be put to sad shift for these necessities." 
Is this argument valid? 

5. "I believe in universal free trade by international agreement. 
But, if other countries are intent upon maintaining protection, it is 



THE PROBLEM OF INTERNATIONAL TRADE 51 

only fair to ourselves to do the same." What is the great economic 
loss in having other countries shut out our goods? Can we better 
matters by shutting out theirs? 

6. "A country has never been despoiled of its money by the 
working of its international trade" (Gide). Why does the author 
feel so sure about this? 

40. The Case for Protection 

A. Despite the preponderance of local and particular arguments, 
the poHcy of protection has a comprehensive social basis. It is the 
purpose of this section to reveal this. It springs from a general dis- 
crediting of the theory of laissez faire, a conception of society in 
developmental terms, and an abiding faith in the conscious control 
of industrial evolution. 

B. Readings 145-47. See also 155, 165, 167. 

C. I. What arguments once used in support of protection are 
no longer valid? 2. What nationalistic theories support protection? 
3. Has the "young industry" argument any current validity? 4. Do 
you accept the statement that protection has aided in the formation 
of capital? 5. Make a careful appraisal of the assumptions of the 
arguments favoring free trade. 6. State the current case for protection. 

D. I. "Through our policy of protection men have been induced 
to invest capital in enterprises which, under free trade, would be 
unprofitable. Since the government has encouraged such invest- 
ments, it must protect them." What name is given to this argument? 
What current validity has it? 

2. "A nation exporting grain in large quantities can profit tre- 
mendously through protection, which diverts labor and capital from 
agricultural to manufacturing industries. Because of the peculiar 
demand for grain, a smaller total product can be sold for a greater 
sum than a larger total product. By such diversion foreign nations 
can be made to bear the expense of newly created manufacturing 
industries." What conditions must be added to those enumerated 
above to make the conclusion valid? 

3. "The protective tariff has the incidental advantage of forcing 
the foreigner to pay a large part of the cost of running the govern- 
ment." In general; are customs taxes paid by foreigners? Can you 



52 CURRENT ECONOMIC PROBLEMS 

point to cases in which they do pay them? In such cases do the 
duties yield protection? 

4. "The argument against protection is that it diverts labor and 
capital from more productive to less productive industries. The 
obvious answer is that it creates the capital and induces the immi- 
gration of the labor employed in protected industries." Where 
lies the truth? 

5. "Protection has served to convert a large amount of consump- 
tive into productive wealth, and has concentrated this in the hands 
of the class best fitted to secure the maximum returns from it." Do 
you agree? 

6. "Protection may serve a useful purpose in conserving the 
natural resources of a country." How? Can it be made to waste 
natural resources? 

7. "Protection may aid in the preservation of the health and vigor 
of a people through the maintenance of a proper balance between 
manufacturing and agriculture, between city and country." How? 
Can free trade be used to secure such a result? 

8. "The success of protection is contingent upon the generosity 
with which its favors are bestowed." Develop and appraise this 
argument. 

9. "Protection broadens and enriches our social life by diversi- 
fying our industrial system. It is an insurance against the cultural 
monotony which free trade fosters." What validity has this argu- 
ment? 

10. "Protection must be as broad as the American principle of 
democracy. Let us not aristocratically protect a few favored indus- 
tries, for instance, sugar, steel, and rubber. Let us show our 
American spirit by placing duties upon all articles of import, and 
by this means let us enable every manufacturer, every farmer, 
every merchant, and every laborer throughout this fair land of ours 
to receive a larger income and to enjoy a larger amount of the good 
things of life than he could were his industry not smiled upon by 
the beneficent rays of protection." Can it give to all more of "the 
good things of life"? This argument might be called "boot-strap 
aviation." Why? 



THE PROBLEM OF INTERNATIONAL TRADE 53 

41. The Tariff and Wages 

A. The various influences exerted by the tariff on wages are 
imphcit in the discussions of the arguments for free trade and pro- 
tection. However, because of the importance of the wages question 
in practical tariff controversy, the more important of them require 
separate presentation. 

B. Readings 145-47- See also 135, 136, 155, 156. 

C. I. What contradictions do you find in the wages arguments 
of the protectionists of 1824 and 1901? 2. Under what conditions 
does protection lower the rate of wages? 3. Does it lower wages by 
decreasing the price of labor or increasing the prices of goods? 4. If 
protection leads to the formation of new capital, what effect does it 
have upon wages? 

D. I. "In America the wages of labor are so high that one 
cannot make enough in manufacturing to pay them without protec- 
tion." ''In America the high wages enjoyed by labor are due to the 
high protective tariff." Point out the contradictions between these 
arguments. Which is valid? 

2. "Advocates of free trade assert that protection forces labor 
to work against nature rather than with it. If this be so, to obtain a 
given result a larger amount of labor will be demanded under protec- 
tion than under free trade. But, just because of this increased 
demand, wages will be higher than under free trade." Would wages 
be higher if all land were stony? if laborers were forced to work with 
one hand tied back of them? Point out the fallacy in the use of the 
term "demand" above. 

3. "Wages are determined by the marginal productivity of labor 
within the economic entity. Accordingly, if two nations freely ex- 
change commodities with each other, the poorest opportunity for 
labor utilized in either of the nations will fix the rate of wages. What, 
then, must be the consequences of a free exchange of goods between 
the United States and China?" What confusion underlies this 
argument? 

4. "The standard of living of American laborers is the highest in 
the world. The American wage, therefore, must be the highest paid 
anywhere. But since American entrepreneurs are forced to pay high 



54 CURRENT ECONOMIC PROBLEMS 

wages, they must be allowed to sell their goods at high prices. To 
do this they must receive the benefits of protection." Point out the 
fallacies underlying this argument. 

5. '^ Under free trade natural resources are used most advanta- 
geously. Consequently the marginal productivity of labor is kept 
highest. It follows, therefore, that wages must be at a maximum." 
Is this sound? 

6. ''Under protection the amount of capital is constantly being 
increased. Consequently the marginal productivity of labor is con- 
stantly being raised. It follows, therefore, that wages must be at a 
maximum." Is this sound? 

42. Tariff Policy in Process 

A. The examination of the conflicting theories of free trade and 
protection which we have just made is necessary to an appreciation 
of the issues involved in the current tariff problem. But, since we 
are not free to start our national experience anew, we are confronted 
by no simple alternative of free trade or protection. We are called 
upon rather to modify a highly complex and established tariff system. 
This problem calls for an understanding that can be obtained only 
by inquiring how our tariff system has become what it is. 

B. Readings 151-54. See also 2, 22, 164-66, 227, 229. 

C. I. What part has protection played in the industrialization 
of America? 2. What forces were behind the Morrill tariff act? 
What impress has it left upon our tariff policy? 3. Account for the 
dominance of the idea of protection in the last part of the nineteenth 
century. 4. What theory underlies the establishment of the tariff 
commission? 5. How has the tariff problem been affected by 
the war? 

D. I. ''During the Civil War the adoption of a comprehensive 
system of internal revenue taxation forced the adoption of very high 
import duties." Explain. After the war what changes were made in 
the system of internal revenue taxation? customs duties? What were 
the consequences? 

2. "The development of American manufacturing upon a large 
scale was contingent upon either high prices for manufactured goods 
or an adequate supply of low-priced labor. Protection offered a 



THE PROBLEM OF INTERNATIONAL TRADE 55 

fulfilment of the first condition; the open door to immigrants of the 
second." Which was chosen? Show as fully as you can the com- 
plementary nature of the two policies. 

3. ' 'Because of a difference in circumstances the identical interests 
which in England have favored free trade have thrust the policy of 
protection upon the United States." How can this be? 

4. "In the future the struggle over the tariff will be less a matter 
of sectional issues, less a matter of contrary economic theories, and 
more a phase of the great struggle between democracy and privilege" 
(Brown). What does the author mean? Do you agree? 

5. ''For some time it has been evident that the future of American 
industry lies overseas. The European war has at last demonstrated 
that fact beyond peradventure." Make a list of the advantages of 
competition for the trade of the world which the war has brought to 
the United States. 

6. Gather and summarize the evidence that the attitude of the 
business interests of the United States is becoming more favorable to 
free trade. What of the attitudes of other industrial groups? 

7. What similarities and dissimilarities are there between the 
industrial position of the United States at the present time and that 
of England at the end of the Napoleonic wars? What meaning has 
this for the tariff problem? 

43. - The Argument from Experience 

A. A historical approach to the current tariff problem involves 
of necessity a study of the "argument from experience." In addition 
to the light which it throws upon the present situation, such a study 
has the added advantage of revealing the very large number of inter- 
related antecedents in terms of which a "result" is to be explained. 
It is thus, incidentally, an object-lesson in economic causation. 

B. Readings 155, 156. See also 157-62. 

C. I. Analogous arguments show that prosperity is due to 
protection and to free trade. Explain the mystery. 2. Is American 
prosperity due to national protection or to free trade between the 
states? 3. What logical method underhes the "arguments from 
experience"? Is it valid? 



56 CURRENT ECONOMIC PROBLEMS 

D. I. ''With protection has come prosperity; protection is, 
therefore, the cause of prosperity." "With an increase in the number 
of suicides has come increased prosperity; suicides are, therefore, the 
cause of prosperity." Which argument is the more vahd? 

2. "America has been endowed with such rich stores of natural 
resources that not even the protective tariff could prevent unbounded 
prosperity." Is this argument usually advanced? Why not? Is 
it more or less valid than that in the first quotation in the preceding 
question? 

3. "Free-trade tariffs in America have inevitably been followed 
by depressions." What historical instances are usually cited in 
support of this argument? Were the tariffs to which depressions 
were attributed free-trade tariffs? Is the chronology of legislation 
and depression correctly stated? What historical evidence is rejected 
in reaching the conclusion above? 

4. Present a valid argument leading to the conclusion that 
protection has played an important part in the creation of our "highly 
pecuniary, industrial, and urban culture." 

5. "With complementary factors, protection has induced a gigan- 
tic, clumsy, and feverish development of manufacturing and mining; 
it has induced the inevitable attendants of this growth, urban life, 
city comforts, slums, poverty, vice; greater concentration of wealth, 
and class differences; a medley of races and a babel of tongues; a 
clash of political and ethical systems; an impotence to direct social 
development; and an overutilization of natural resources." Has 
protection caused development to proceed at too fast or too slow a 
pace? Has it imposed a disproportionate share of the costs upon 
the present or upon future generations? Have its results been worth 
their cost? 

44. Protection in Practice 

A. To become real the theory of free trade or of protection must 
be embodied in tariff schedules by Congress. Too frequently it is 
forgotten that Congress is not an accurate mechanism for translating 
policy into law. Hence the viewpoint, interests, and methods of the 
legislative body in themselves impart to tariff legislation many of its 
most salient characteristics. 



THE PROBLEM OF INTERNATIONAL TRADE 57 

B. Readings 157-62. See also 137, 139-43. 

C. I. What technical knowledge is necessary to an understanding 
of tariff schedules? 2. The very nature of a tariff bill suggests that 
legislation is subject to what abuses? 3. How is the evidence upon 
which a tariff bill is based collected and digested? 4. What impress 
is bicameral, committee, and conference action likely to leave upon a 
tariff bill? 5. Upon what logical principle are the conflicting interests 
of various sections and industries reconciled? 6. Mention character- 
istic tricks of tariff-making. 7. Why was the selection upon "Tariff 
for Politics Only" included in the readings? 8. Can costs be deter- 
mined accurately enough to serve as a basis for duties? 9. What 
influence is a tariff based upon difference in "costs of production" 
likely to exert upon the development of foreign trade? of domestic 
trade? 10. Can protection be made to work in practice? 

D. I. Trace, step by step, the course of a tariff bill, from the 
time it is drawn up by a committee of the lower House until it receives 
the President's signature. To what principles will a bill drawn in 
this particular way conform? 

2. Cite concrete evidence from the Underwood-Simmons bill 
supporting the conclusion that Congress is incapacitated to formulate 
tariff legislation. 

3. "The tariff is a local issue." How can this be? 

4. "Protection is all right in theory, but it will not work in 
practice." Prove this proposition. 

5. "To accept differences in costs of production as a basis for 
tariff legislation is definitely to accept a policy of protection. ' ' Why so? 

6. "If the principle of differences in costs as a basis for duties 
is consistently carried out, it must have for its objective national self- 
sufficiency." Why? 

7. Can one who favors basing tariff duties on differences in costs 
of production consistently vote for an appropriation for building an 
interoceanic canal, the object of which is to lower transportation 
charges? 

8. What is the importance of making a distinction between the 
rate of wages per day and the labor cost per unit of product? 
Mention other details of accounting which need consideration in any 
intelligent discussion of a tariff based upon "costs." 



58 CURRENT ECONOMIC PROBLEMS 

9. "No true protectionist can favor a 'scientific' tariff. To place 
the protected manufacturer in a position in which he can make no 
more than in an unprotected industry neutraHzes the advantages 
to be obtained from protection." Develop this argument in the 
light of "the case for protection." Is it valid? 

45. The Tariff and World-Trade 

A. The war has cut athwart the development of the trade of 
the world and it will have to be re-established along new lines. In 
particular the position of the United States has been changed. The 
increased costs of production in old-world countries, the increase in 
our shipping, our export of capital, and other factors have given us 
a place to which we are to accommodate ourselves. 

B. Readings 163-66. See also 107, 132, 154, 215, 332, 382. 

C. I. What effect has the war had upon the position in inter- 
national commerce of Germany? of Great Britain? of the United 
States? 2. What is the export of capital? How is it effected? 
3. What is the significance of the increase in our shipping? 4. Give 
examples of the "scientific" encouragement of foreign commerce. 
5. Why did the United States government sanction the organization 
of "export associations"? 

D. I. "The return to production of the armies of Europe, the 
employment of cripples who can be had for a pittance, and the utili- 
zation of technical knowledge acquired during the war will enable 
European countries to turn out at a low price a flood of goods. With- 
out a higher tariff they will drive us from the markets of the world." 
Is this argument sound? 

2. "In most European countries the real costs of production have 
been substantially increased by the war. Evidence of this increased 
cost is to be found in disabled labor, the use of machines that have 
depreciated, the partial disorganization of the industrial systems, the 
greater cost of maintaining order, and kindred facts. For some time 
Europe will not be able to renew upon a substantial scale a fight for 
the world's trade." In what sense is the word "costs" used above? 
Is this argument sound? 

3. "The investment of capital abroad is the only device by which 
the United States can greatly extend its commerce with Europe. 



THE PROBLEM OF INTERNATIONAL TRADE 59 

This is due to the simple fact, that Europe has nothing with which to 
pay us for our exports. We must take pay in securities which are 
promises to pay at a future time." How long can we hope to carry 
on such a one-sided trade? Is it to our interests to help in the 
reconstruction of Europe by furnishing capital? What will happen 
to the course of trade when Europe begins to repay us? 

4. If we loan to Europeans upon promises to repay us at some 
future time, what will be the effect upon the total volume of pro- 
ductive wealth in this country? Upon the volume of consumptive 
goods here? What will be the effect of this upon the cost of living? . 
the status of industrial unrest? 

5. Account for the growing demand for "research in foreign 
trade." With what inquiries is such research concerned? Is it com- 
patible with a spirit of protection? 

6. What advantages will the country at large gain by the estab- 
Hshment of a direct commerce with South America instead of the 
three-cornered trade between South America, the United States, and 
the United Kingdom which was in vogue before the war? 

46. Trade and the Peace of the World 

A. Perhaps the most important of all questions concerned with 
international trade at the present time is how it can be organized to. 
prevent its interference with the peace of the world. One group 
would do it by a policy of national self-sufficiency which would enable 
us to look after ourselves in any emergency. Another would do it 
by allowing trade to tie the nations together, expecting to create a 
network of mutual interests which would be a barrier to war. 

B. Readings 167-69. See also 59-62. 

C. I'. Can protection give to a nation the self-sufficiency which is 
required to fight a modern war alone? 2. Can a tariff policy be made 
to reduce the "temptations to war"? Give illustrations of the "cult 
of national self-sufficiency." 

D. I. "Nature has so contrived the constitution of the universe 
that no nation can possess the sources of supply of all the materials 
essential to fighting a successful war." Do you know of any nation 
which has all the necessary materials? 



6o CURRENT ECONOMIC PROBLEMS 

2. ''An attempt to realize an ide^ of national self-sufficiency 
will inevitably lead to war." Argue for or against this proposition- 

3. "National armament is competitive. National armament 
uses economic resources which would otherwise be put to a produc- 
tive use." Make out the economic case against national armament. 
What considerations support it? 

4. Can we organize "export associations" without giving tacit 
encouragement to the concerns involved to organize for domestic 
purposes? Is the government prepared to control organized indus- 
tries to insure their serving the public interests ? Are there likely to 
arise huge combinations engaged in world-trade which will attempt 
to use the national governments for their purposes? 

5. Should standards be adopted for international trade, govern- 
ing markets, commodities, finance, trade practices, etc.? If so, by 
what authority should the provisions of the code be enforced? 



VIII. THE PROBLEM OF RAILWAY REGULATION 

47. The Basis of the Problem 

A. For many years past the American people have been con- 
stantly confronted with the problem of railway regulation. The 
persistence of the problem has been equaled only by its changing and 
ever-bewildering appearance. Each attempt to dispose of it seems 
only to have led to complications. In its development — for develop- 
ment it has had, rather than solution — the dominant theory of the 
relation of the state to industry has been of little importance. Its 
history has been very largely determined by the economic character- 
istics of the railway industry. With these, therefore, it is best to 
begin our study. 

B. Readings: Introduction to VIII, 170-72. See also 52, 
200-204. 

C. I. What functions are performed by the transportation sys- 
tem in the organization of industrial society? 2. What is the eco- 
nomic importance of "the dual nature" of the railway corporation? 
3. What problems are associated with the monopolistic character of 
the industry? 4. What problems grow out of "joint costs"- and 
"diminishing costs"? 5. Why cannot competition be depended upon 
to preserve a proper balance between the interests of the corporation 
and those of the public? 

D. I. "Through the application of the machine process to 
transportation society has been organized upon a pecuniary basis 
into a single comprehensive entity." Write a short historical sketch 
showing the part that transportation has played in the creation of 
the present econornic order. 

2. "A sound organization of society upon a pecuniary basis 
requires stability and cheapness in transportation charges." Can 
this prime essential to economic order be secured under competition? 
Why is it an essential? 

3. Show by a hypothetical calculation which approximates the 
real facts how a 10 per cent increase in traffic may increase the profits 
of a railway corporation 200 per cent or more. 

61 



62 CURRENT ECONOMIC PROBLEMS 

4. Why should you expect the problem of "laissez faire versus 
social control in America" to manifest itseK first of all in connection 
with the transportation problem? 

5. "Because the railway business is subject to the two economic 
principles of 'diminishing costs' and 'joint costs' it is necessarily a 
monopoly." Show how, from this, there arise inevitably the prob- 
lems of protecting the public against the railroads and the railroads 
against the public. 

48. Aspects of Rate-Making 

A. The question of rates is the epitome of all railway problems. 
The interests of competing shippers are involved in particular rates. 
The interests of shippers as a group and of the public, on one hand, 
and the railroads, on the other, converge upon the schedule of rates 
as a whole. The former is an aspect of the problem of industrial 
opportunity and the competitive organization of society. The second 
involves the problem of the railway as a monopoly. The importance 
of these problems necessitates a consideration of the theory of rate- 
making. 

B. Readings 173-77. See also 73, 273. 

C. I. Why do all railway problems converge in the question of 
rate-making? 2. Of what economic importance is the complicated 
technique of rate-making? 3. How is the problem complicated by 
state competition? 4. What other kinds of competition affect the 
making of particular rates? of the schedule as a whole? 5. What is 
the correct theory of the particular rate? of the schedule as a whole? 
6. Make a careful appraisal of the rate theory of the Interstate 
Commerce Commission. 

D. I. Can the problem of the proper regulation of schedules of 
' rates, as distinct from particular rates, be adequately dealt with so 

long as authority over rates is divided between the federal and the 
state governments? so long as the groups of railroads over which as 
units shipments are carried remain independent corporations? 

2. Is the principle of ''charging what the traffic will bear" ade- 
quate for particular rates? for schedules? Is the principle of costs 
adequate for particular rates? for schedules? 



THE PROBLEM OF RAILWAY REGULATION 6$ 

3. ''The schedule of rates should be drawn in such a way as to 
result in such goods being carried, in such quantities, and for such 
distances as will yield the maximum of social utility." Explain in 
detail how, on this principle, a schedule of rates is to be estab- 
lished? 

4. Quite recently the Interstate Commerce Commission has been 
called upon to pass upon increases in whole schedules of rates. Com- 
pare the problem involved in such a decision with that presented in 
passing upon individual rates. By allowing general increases what 
principles is the Commission establishing? 

5. Show, by a short historical account, how the problem of deter- 
mining the general schedule of rates involves the problem of railroad 
valuation. 

49. The Nature and Extent of Regulation 

A. It is interesting to trace how, in an attempt to reach the 
manageable elements in the railway industry, the administrative 
powers of the government have little by little been increased. It is 
interesting to note that with each increase in powers, the ultimate 
factors have escaped, calling for a new increase. Thus the problem 
of railway regulation has constantly reappeared in new forms and 
with increased complexity. 

B. Readings 178-83. See also 25, 89, 210, 392. 

C. I. How many of the complaints made against the railway 
system in 1886 are valid today? 2. What particular problems led 
to the granting of the powers to the Interstate Commerce Commission 
whose provisions are separately enumerated in the readings? 

3. What particular powers were conferred in each of these grants? 

4. What was the "Adamson Act" all about? What problems did it 
settle? What problems did it raise? 5. On the eve of the war what 
unsolved problems of government regulation remained? 

D. I. Is the problem of the regulation of the railroads in any 
way complicated by the ''division of sovereignty" between the 
federal and the state governments? 

2. Enumerate the aspects of regulation which you regard as 
infringements of the principle of freedom of contract. How are such 
infringements to be explained? 



64 CURRENT ECONOMIC PROBLEMS 

3. By concrete examples show how unregulated railway rates 
may be made to absorb a surplus yielded by a protective duty; to 
yield a protection not afforded by the tariff; to neutralize the effect 
of a protective duty. 

4. "Roughly speaking, the history of the relation of the govern- 
ment to the railroads can be divided into a period of favors antedating 
1870 and a period of restriction following that date." Why did the 
change in attitude come at that time? 

5. Explain how it came about that the Interstate Commerce 
Commission was given power to prescribe and supervise the accounting 
systems of the railroads. Of what significance is this grant of power 
in the development of the railway problem? 

6. Write a short essay showing, step by step, the occasions 
and the results of the extension of the power of the government 
over the railways. What title is most appropriate to such an essay? 

50. Valuation of the Railroads 

A. It is an estabhshed principle that in prescribing rates a fair 
return must be allowed on the investment. The question of rate- 
making, particularly of whole schedules, involves, therefore, an 
inquiry into the proper valuation of railroads for rate-making pur- 
poses. The need for a valuation was in no sense reduced by the war. 
In the future, if we are to have private management, we will need to 
know proper valuation. If we are to have pubhc control, proper 
compensation to owners must be based upon correct values of their 
property. 

B. Readings 184-87. See also 85, 216. 

C. I. What sequence of events has led to the grant of power 
to evaluate the railroads of the country? 2. Compare the respective 
merits of ''market value" and "physical value" as the basis of rates. 
3. Why may we regard "franchise value" and "land value" as the 
real points at issue in the valuation of the railroads? 4. By what 
theory shall the value of railway land be determined? 5. Why does 
the valuation of railway property necessarily begin with the formu- 
lation of a theory? 6. Formulate an adequate theory for railway 
valuation. 



THE PROBLEM OF RAILWAY REGULATION 65 

D. I. Railway property can be valuated for purposes of invest- 
ment, taxation, or rate-making. Should the procedure be the same 
in the three cases? 

2. ''The theory of physical value is adequate so long as we are 
dealing with buildings, construction work, and equipment. It is 
inadequate as a basis for the determination of land and franchise 
values." Why or why not? 

3. ''To take market value as a basis of rates is an argument in a 
circle." Why? Is it arguing in a circle to include in a valuation the 
land at its value to the railroad? 

4. Does the interdependence of the railway systems and their 
schedules of rates in any way complicate the problem of railway 
valuation? Is the problem more complicated in character, or merely 
of greater magnitude, than that involved in evaluating municipal 
utilities? 

5. Are the difficulties in valuation merely those of getting the 
initial values, or will it be exceedingly difficult to keep values up to 
date? Will a change in the value of money or the rate of interest 
affect the valuations determined by the Commission? 

6. "Two roads, the A. R. & Q. and the K. V. & W., connect two 
cities. The former runs through a prosperous section, carrying a 
large amount of local freight. The latter traverses a mountainous 
region, and is dependent largely upon through traffic. The initial 
cost and the upkeep of the latter road are much greater than those of 
the former. The Interstate Commerce Commission is called upon 
to determine rates between the two cities." Must the rate be the 
same for the two roads? If its basis is cost on the former road what 
will happen to the latter? if cost to the latter, what to the former? 
In this case who is entitled to the large revenues yielded by the 
former road? Is it certain that the revenues will be as large as super- 
ficially might be expected? What has this case to do with the practical 
problems of rate-making? 

51. The Railroads in War Time 

A. Although it seems obvious, it took the war to show the real 
place of transportation in the industrial system. The railroads 
occupied a central position in the program of national strategy under- 



66 CURRENT ECONOMIC PROBLEMS 

taken by the leading warring nations. So important was this instru- 
ment of unification and co-ordination of national effort that every- 
where it was found necessary for the government to assume general 
oversight of transportation systems during this emergency. 

B. Readings 188-91. See also 115, 116, 125. 

C. I. What led the government to assume general supervision 
over railway transportation during the war? 2. What was the 
nature of the scheme of federal supervision? 3. List the policies of 
the railroad administration relative to such matters as priorities in 
shipment, rates, extensions, etc., and compare them with the policies 
of the roads in private hands. 4. In what respects was federal 
administration most successful? in what least successful? 5. What 
problems of administration did the government experience reveal? 
What problems of making the railroads serve the commonwealth? 

D. I. Account for the "breakdown" of the transportation 
system in 191 7. Give evidences of its failure to perform the functions 
required of it. Was this "breakdown" a proof of the "failure of 
private management"? 

2. "The history of the railroad administration attests conclu- 
sively the failure of government ownership." Did we have "govern- 
ment ownership" during the war? What did we have? Define 
quite exactly the relation of the national government to the private 
management of the roads. 

3. Were the petty annoyances which the traveler suffered during 
1 91 8 chargeable to the inefficiency of the United States Railroad 
Administration? To what were they chargeable? 

4. "During the war the government chose to enrich railroad 
employees at the expense of the roads. These arbitrary increases in 
wages were unwarranted." Did the private owners of the roads 
pay the increases in wages? Why did wages materially advance in 
other industries? How plentiful was labor? In view of advances 
elsewhere what was the raihoad administration bound to do? Was 
the policy of dealing with labor which such incidents reveal a wise one? 

5. "At most the railroad administration exercised only a superficial 
observation over the railroads. The latter were left in the hands to 
which they had been entrusted by their private owners. The situ- 
ation was one in which the government could be held responsible for 



THE PROBLEM OF RAILWAY REGULATION 67 

the shortcomings of the officers of the roads. In fact there was a 
unique opportunity for those who actually controlled them to dis- 
credit government supervision." Do you agree or disagree? Exam- 
ine the argument fully. 

6. On the basis of past railway earnings was the compensation 
granted the owners by the government adequate? 

7. Write an essay upon "The Place of the Railroads in a Program 
of National Strategy." 

52. The Crisis in Railway Policy 

A. Most of the problems of railway regulation which were press- 
ing for solution upon the eve of the war are still with us. They are 
complicated by the necessity of determining what we are to do with 
these properties. The necessity of deciding to keep them, or to 
return them, and if the latter, upon what conditions, gives an oppor- 
tunity for a consideration of the fundamentals of the problem and a 
lasting solution of its perplexing enigmas. Whether we shall, or 
whether we can, adequately settle the problem, we shall soon know. 

B. Readings 192-96. See also 133, 216, 382-84. 

C. I. Why is there popular distrust of "solution by experi- 
mentation"? 2. Reduce to a few simple propositions the plan of the 
"railroads." 3. Enumerate the various propositions which together 
make up the "Plumb Plan." 4. Can these proposals be discussed 
separately, or must they be discussed as one? 5. What is the best 
plan for supplying to the railroads an adequate supply of capital? 
6. Enumerate the conditions which, in your judgment, any adequate 
plan for the reorganization of the railroads should meet. 

D. I. "The service performed by the railroads must be economic. 
All duplication and unnecessary expense must be eliminated." Does 
this require their organization into a single system, the organization 
of a number of regional systems, or the return of the properties to 
their owners? 

2. "Economic service necessitates a single regulating body, 
applying definite standards, and rendering quick decisions." Do you 
favor the retention of the present dual system of federal and state 
supervision? Should the Interstate Commerce Commission be 



68 CURRENT ECONOMIC PROBLEMS 

retained? Should it be superseded by an administrative department 
of the government under a cabinet officer? 

3. To perform their service adequately in the future the railroads 
must have an adequate supply of capital. Should this capital be 
obtained by the sale of additional securities? Can it? Should rates 
be high enough to pay reasonable dividends and permit a surplus to 
be accumulated which is to be invested in extensions and improve- 
ments? If this device is used, should this surplus be capitalized? 
Should the owners of the roads be permitted to earn dividends upon it? 

4. Are we to regard the bargain between the railroads and their 
employees relating to wages, hours, and conditions of employment as 
a private matter that concerns only the two parties? If the two 
parties fail to reach an agreement, shall we allow service to be sus- 
pended? What adequate method can you suggest for handling the 
problem of railway labor? 

5. Should the public be called upon to subsidize inefficient 
service? to pay the costs of obsolete methods? to pay dividends 
upon "watered" stock? How can standards of operation and manage- 
ment be fixed? How can they be enforced? 

6. "The price paid by the public for railway service should, 
among- other things, include a reasonable return upon a genuine 
investment, and reimbursement for the costs involved in furnishing a 
service that meets prescribed standards in management, organization, 
technique, and utilization of human labor." Explain in full. QuaHfy 
this statement is such a way as to make it an expression of your own 
opinion. 

7. "The end of the railway problem is not as yet; for, if regulation 
fails, the pubHc will demand ownership, and, if it succeeds, the rail- 
roads will demand it." Is this dilemma a true explanation of the 
current crisis? 



IX. THE PROBLEM OF CAPITALISTIC MONOPOLY 
53. Is Monopoly Inevitable? 

A. The railway, which we have just studied, is both a typical 
and the most conspicuous example of "natural" monopoly. Before 
addressing ourselves to the far more complicated problem of ''capi- 
talistic" monopoly, it is well to try to obtain some idea of the age, 
the bewildering forms, and the extreme complexity of the monopoly 
problem. This can be done by raising the question of the inevitability 
of monopoly. 

B. Readings: Introduction to IX, 197-200. See also 40, 170, 
171, 324. 

C. I. How long has the monopoly problem been with us? Has 
it always been the same problem? 2. Account for the persistence of 
the protest against monopoly. 3. List and classify all the forms of 
monopoly of which you know. 4. Make a clear distinction between 
monopoly and large-scale production. 5, Is there a real antithesis 
between the "natural" and the "artificial" explanations of monopoly? 

D. I. "Typical examples of monopoly are corners, rings, patents 
of monopoly, pools, cartels, trusts, holding companies, 'Gary dinners,' 
interlocking directorates, 'communities of interest,' 'gentlemen's 
agreements,' closed shops, and codes of 'professional ethics.' " 
Explain how each of these in some sense or other may be regarded as 
a monopoly. 

2. Would you classify as monopoly profits the rent of land? 
royalties from mines? patents? copyrights? the wages of locomo- 
tive engineers? the salaries of* corporation officials? the honoraria 
of opera singers? the emoluments of college professors? 

3. "The introduction of the machine necessitated large-scale 
production. Monopoly is merely the final step in this natural pro- 
cess." If the argument is logical, is it clear that monopoly is the 
final step? Is the distinction between the business and the industrial 
unit of value in appraising the argument above? 

69 



70 CURRENT ECONOMIC PROBLEMS 

4. "In course of time the principle of economy of operation will 
cause each industry to be organized as a monopoly; then combinations 
will be effected between the monopolies controlling the various stages 
in the production of a good; finally these combinations will be aggre- 
gated into one gigantic industrial concern controlling all industries." 
"Large-scale production is subject to the law of diminishing returns." 
Show how the principle just quoted can be made to dispose of the 
argument above. 

5. Did the organization of business "by industries," fostered by 
the government during the war, encourage monopoly? 

54. The Conditions of Monopolization 

A. If we hope to bring monopoly under control and make it 
play its proper part in industrial development, we must understand 
its fundamental antecedents. Accordingly an answer to the ques- 
tion raised in the last section calls for a rather detailed study of the 
"conditions of monopolization." 

B. Readings 201-4. See also 88, 92, 166, 172. 

C. I. What contributions has the machine technique made to 
monopoly? 2. Connect industrial development and "the business 
cycle" with "the failure of competition." 3. Write a chapter on 
"Incentives to Monopoly," for a book on the trust problem. 
4. What artificial incentives have encouraged the formation of 
monopolies? 5. What are the advantages to competing concerns 
of forming combinations? 6. What advantages and disadvantages 
are there to the general public in combination? 7. Is monopoly 
inevitable? * 

D. I. "The institution of capitalistic monopoly is new; its 
life-history is not as yet fully revealed; our experience is Umited; 
and our view is too close for perspective. Therefore we are ill pre- 
pared to pass upon the nature of monopoly." Develop this argu- 
ment in detail. Do you accept it? Even if you do, does it justify 
a laissez faire policy relative to monopoly? 

2. "The introduction and extension of the machine process and 
the pecuniary organization of society, which is its necessary comple- 
ment, are the two principal antecedents of capitalistic monopoly." 
Explain this argument. Even if true, does it follow that the machine 



THE PROBLEM OF CAPITALISTIC MONOPOLY 71 

process and the pecuniary organization of society are inseparable 
from monopoly? 

3. "The higher the rate of industrial development, the greater 
the tendency toward monopoly." Prove or disprove. 

4. "Peculiar industrial conditions determine that in one line 
there shall be monopoly and in another not. Typical of these are 
inelasticity of demand, loss of identity by an article before it reaches 
the consumer, production in a stage of increasing returns, the possi- 
bility of grading an article to appeal to different social classes, and the 
localization of the supply of an essential raw material." Explain, by 
concrete examples, how these conditions have contributed to the 
maintenance of various monopolies. 

5. "The incentive to monopoly is financial. Large profits are 
made by the promoters of combinations. In addition the combina- 
tion has a value higher than the aggregate of the values of the separate 
establishments." Explain each of these incentives. Does this 
argument contradict those enumerated above? 

6. "Monopoly is due to 'artificial conditions.' Among these are 
'the concentration of cash,' 'the restriction of credits,' the fickleness 
and special favors of the tariff, and the clever manipulation of rail- 
way rates." Explain how each of these has contributed to the 
maintenance of monopoly in particular fields. Which of them do 
you regard as general "causes" of monopoly? 

7. "Agreements not to cut prices are necessary to secure the 
large profits made possible by a generous protective duty." Why? 

8. Enumerate and classify the conditions of monopolization. 
Weigh the conditions enumerated according to their importance. 

55. Types of Unfair Competition 

A. If unrestrained, industrial, like railway, corporations are 
prone to resort to "unfair" methods of securing business. These 
tend to disturb relative competitive advantages, to foster monopoly, 
and to interfere with the competitive organization of industry upon 
a pecuniary basis. 

B. Readings 205-8. See also 39, 70, 161. 

C. I. Classify the tyipes of "unfair" competition mentioned in 
the readings. 2. Show, by examples, the relation of the nature of the 



72 CURRENT ECONOMIC PROBLEMS 

industry to the types of unfair competition used. 3. Enumerate 
the economic incentives to unfair competition. 4. By what ethical 
standards are the practices mentioned pronounced "unfair"? Are 
these standards to be accepted? 

D. I. Make a careful and detailed contrast between the incen- 
tives to railway discrimination and to ''unfair" industrial competition. 
Make a similar contrast between the results of the two. 

2. ''The ultimate objective of unfair methods of competition is 
monopoly." Explain. 

3. "The unfair methods once used by the great corporations were 
an expression of the contemporary spirit of extreme individuahsm 
in business. They were an inevitable complement of the social phi- 
losophy of a generation ago." Are such methods a thing of the past? 
What problems in ethics does this quotation raise? 

4. "The competition of industrial estabhshments, of which 
'unfair' practices are but a superficial manifestation, vindicates itself 
in concentrating the industrial property of the country in the hands 
of those best fitted to manage it. It has the incidental advantage of 
encouraging the formation of large aggregates of new capital." Give 
the argument leading up to each of these conclusions. Are they 
valid? 

5. "The theory of the state has been that industrial justice to the 
conflicting interests of producers and consumers, as well as to rival 
producers and rival consumers, inheres in a scheme of prices estab- 
lished under competition. The presence of monopoly, therefore, 
interferes with distributive industrial justice." Explain in detail 
this "legal presumption." Show the seriousness of the ethical and 
legal problems which follow the imperfect action of competition as 
an organizing force. 

56. The Regulation of Monopoly 

A. To suppress or control monopoly, we have, of course, placed 
our primary reliance in the government. The history of its attempts 
is marked by two principal characteristics: first, a policy aiming at 
the restoration of competition and a determination of its plane; 
secondly, the reappearance of the problem in new guise after each 
attempt at solution. 



THE PROBLEM OF CAPITALISTIC MONOPOLY 73 

B. Readings 209-14. See also 22, 132, 178-83, 394. 

C. I. Show, by examples, the value which a change in the form 
of business combination has in eluding the law. 2. Is this process of 
change of form at an end? 3. What was the intent of the Sherman 
Act? 4. Is the theory underlying it sound? 5. Enumerate its most 
important provisions. 6. Appraise the efficacy of its mechanism in 
the light of the dissolution of the Standard Oil Company. 7. What 
was the occasion for the Trade Commission and Clayton Acts? 
8. Will their enforcement provide a satisfactory solution of the trust 
problem? 

D. I. "The contest between law and combination, manifested 
in changing forms of organization, has resulted in a reduction of the 
problem of monopoly to its lowest terms, and a clear statement of 
the issue involved." State the issue as clearly as you can. 

2. "The history of trust legislation represents an attempt to 
restore competition and to regulate its plane." Which object is 
dominant in the Sherman Act? the Trade Commission Act? the 
Clayton Act? 

3. Defend or attack the justice of the "threefold damage" clause 
of the Sherman Act. 

4. Write an argument defending or attacking the Supreme Court 
for writing the word "reasonable" into the Sherman Act. 

5. Present, as clearly as you can, the issues involved in the 
antithetical proposals of the regulation of monopoly and the regu- 
lation of competition. 

57. The Future of Regulation 

A. The monopoly problem has usually been considered only in 
its more immediate aspects. As a result there has been no satisfactory 
accounting of the relative values and costs of monopoly and compe- 
tition. Equally striking is a failure to take account alike of the more 
ultimate results to which the antithetical policies may lead and a 
disregard of the larger social and non-pecuniary elements involved 
in the problem. 

B. Readings 215-16. See also 5, in, 196, 240, 340, 386, 395. 

C. I. Has the war increased or decreased the importance of the 
problem of monopoly? 2. Does standardization make for or against 



74 CURRENT ECONOMIC PROBLEMS 

monopoly? 3, What are the costs and values of competition? 
4. What are the costs of regulated monopoly? What are its social 
values? 5. What tendencies would competition and monopoly 
severally impart to the development of industrial society? What is 
the ultimate end toward which each aims? 6. Outline a just and 
adequate trust policy. 

D. I. "The policy of standardization, encouraged by the 
government during the war, tends toward monopoly." State and 
examine the evidence upon which this statement rests. 

2. "Standardization is the solution of the problem of national 
economy." Connect standardization with the machine process. In 
what respect would standardization make for a more economic use of 
our limited resources? What disadvantages would attend its use? 

3. What effect would extensive standardization have upon our 
export trade? upon export associations? upon the peace of the 
world? upon international organization? 

4. Would standardization undermine personality? How far 
would you go in recommending a program of standardization? Upon 
what principles would you rest its use? 

5. "A policy of regulated monopoly may be expected even- 
tually to lessen the rhythm of business activity." Support or attack. 

6. "Monopoly removes the incentive to initiative, displayed alike 
in personal efficiency, improved organization, and advance in tech- 
nique." "Monopoly, by insuring economic security, will cause the 
instinct of workmanship to take the place now occupied by the spirit 
of individual acquisition." Where hes the truth? 

7. "Even if it be true that in certain lines of production the 
tendency toward concentration is too strong to be checked, neverthe- 
less it would be unsafe for the government to lay down any policy 
other than that of restoring competition and determining its plane." 
Why or why not? 

8. Explain the result that monopoly is likely to have upon the 
stratification of society, the concentration of wealth, the distribution 
of industrial opportunity, the relative size of incomes,' the nature of 
educational advance, the realization of political democracy, the nature 
of social development. What have these, and kindred questions, to 
do with the monopoly problem? 



THE PROBLEM OF CAPITALISTIC MONOPOLY 75 

9. "The matter at issue is a question less of the relative 'economy* 
of monopoly and competition than of the kind of economic organiza- 
tion best calculated to give us the kind of society we want" (Young). 
Explain fully. Show the connection of this with other problems which 
we have discussed or are going to discuss. Can the monopoly 
problem be solved in isolation, or must it be considered as a part 
of a social program? 



X. THE PROBLEMS OF POPULATION 
58. The Question of Numbers 

A. Quite different in character, yet intimately associated with 
the problems of economic organization just considered, are those 
which have to do with the welfare of the classes which make up the 
"economic order." Of these the most obvious and the most funda- 
mental is the problem of population. It is well to begin our study 
of this subject with the "problem of quantity" stated in its simplest 
terms. 

B. Readings: Introduction to X, 217, 218. See also 8, 56, 117, 

275. 369- 

C. I. With what other economic and social problems is the 

question of population directly and indirectly concerned? 2. Show 
the fundamental dependence of general and class welfare upon the 
ratio of population to resources. 3. Account for the early appraisals 
of population given in the readings. 4. Explain the changing value 
placed upon a large population in America. 

D. I. Which of the following can be explained in terms of the 
ratio of population to economic resources: the exodus from Eden? 
the attempt of the Helvetians to move out of their boundaries into the 
Roman province? the invasion of England by the Angles, Jutes, and 
Saxons? the practice of infanticide among certain primitive peoples? 
the survival of polyandry in Thibet? 

2. "Some of the most important crises in social development 
have been associated with a sudden change in the ratio of population 
to resources. Among these may be mentioned the Black Death, 
which reduced population; the economic discovery of America, which 
increased resources; and the Industrial Revolution, which through 
a superior technique practically increased resources." Explain the 
significance of each of these changes. 

3. Give a rational explanation of the high value set upon a large 
population by the writers of the Old Testament. Is there any con- 
firmation of this explanation in recent events in Europe? 

76 



THE PROBLEMS OF POPULATION 77 

4. "Children may be to their parents either assets or Kabihties." 
On this basis explain the changing American attitude toward a large 
population. 

5. '^Children are the property of the poor." Does this explain 
the attitude of the industrial class toward the size of the family? 
How are the attitudes of the leisure, business, and professional class 
to be explained? 

6. The law of population and the law of diminishing returns 
have together given to economics the title of "the dismal science." 
Why? 

59. The Malthusian Theory 

A. The quantitative theory of population is inseparably asso- 
ciated with the name of Malthus. A clear understanding of it 
*iecessitates attention to its original statement, its criticism, its 
development, and its presence in current economic problems. 

B. Readings 219-22. See also 5, 13, 17, 292, 306, 367, 376. 

C. I. State and criticize the theory of population as stated by 
Malthus. 2. Has the rate at which population increases anything to 
do with the validity of the principle? 3. Distinguish between the 
teachings of Malthus, the Malthusians, and the neo-Malthusians. 
4. In what proposal does one-Mai thusianism^ find its most conspicu- 
ous current expression? 5. What current arguments associate 
Malthusianism with capitalism? 6. What relation has "population 
pressure" to war? 

D. I. "In the animal world the usual condition is an equilibrium 
between numbers and food-supply." "Human history has been 
marked by a succession of planes, on each of which there was for a 
time a tendency toward an equilibrium between population and 
economic resources." Explain each statment. Why is the expres- 
sion "a succession of planes" used in the second? 

2. According to the most reliable evidence, the population of 
England at various dates has been as follows: 1086, 2,000,000; 1348, 
4,000,000; 1377, 2,000,000; 1700, 5,500,000; 1750, 6,467,000; 1770, 
7,428,000; 1790, 8,675,000; 1811, 10,164,000; 1861, 20,066,000; 
1891, 29,900,000; 1901, 32,527,000; and 191 1, 34,045,000. Explain 
the changes in population indicated by these figures. Account for 
the rapid increase in population in modern England. 



78 CURRENT ECONOMIC PROBLEMS 

3. Compare the work of Mai thus with that of Darwin in method, 
in conclusions, in attitude toward social reform, and in influence 
upon social reform. Which, if either, is animated the more by the 
spirit of laissez faire? 

4. "Each mouth that is brought into the world brings two hands 
with which to fill it." Does this annihilate the Malthusian theory? 

5. "During the nineteenth century population increased at an 
unprecedented rate. Yet, at its close, the standard of living was 
higher than ever before." Does this prove the non-operation of the 
law during this century? 

6. "The standard of living is the result, not of one, but of many, 
casually independent factors. Among these are the quantity of 
natural resources, the changes in the volume of capital, the develop- 
ment of technology, and the changes in population. These cannot 
be reduced to a single economic formula. It is accordingly best to 
regard the law of population simply as the tendency of numbers 
to increase." Justify this statement of the law. 

7. "Since man is a rational being, the very statement of the 
Malthusian theory was one cause of the defeat of its own prophecies." 
State the newer "volitional" theory of population (Hobhouse). 

8. "If population is not uniformly checked by all classes, it is 
necessary that we have a stratified society, based on property and 
inheritance. That alone will save the privileged classes from the 
penury and woe which, without stratification, would be the lot of all." 
What validity has this argument? What relevancy has it to the 
proposition to adopt socialism? 

9. "Differences in the rates of increase within the several social 
classes of a country are more significant than differences in the rates 
of increase in different countries." What social problems does the 
former affect? the latter? 

60. The Coming of the Immigrant 

A. At present the question of the quantitative control of popu- 
lation appears in two problems, that of "birth-control" and that of 
immigration. The former is largely a matter of voluntary social 
conventions, the latter of governmental action. Each can be made 
a reflection of the social judgment as to the quantity of population. 



THE PROBLEMS OF POPULATION 79 

The issue, however, in connection with the former is hkely to be lost 
in considerations of individual weKare; and in the case of the latter 
to be confused by the introduction of ethnic, religious, political, and 
cultural questions. 

B. Readings 223-25. See also 6, 8, 14, 394, 396. 

C. I. What significance does the fall in the native birth-rate 
give to the problem of immigration? 2. What is your reaction to 
the account of the ''immigrant invasion"? 3. What importance 
attaches to the rate of immigration? 4. What significance attaches to 
the decline of immigration since the beginning of the war? 5. When 
will "normal" immigration be resumed? 6. State the quantitative 
problem of population implicit in the immigration problem. 

D. I. To the proposal to equalize property as a means of 
abohshing poverty Aristotle interposed the objection that it would 
prove unworkable unless the state exercised a control over the growth 
in numbers. What must have been his line of argument? ^ What 
relevancy has it to current problems? 

2. "Population should increase more slowly than natural resources 
and technical advance if progress is to be made." Apply this to the 
immigration question. 

3. "The principal incentive to migration is differences in wages 
and standards of Uving." Has the war removed these differences 
between America and southeastern Europe? Then why has immi- 
gration practically ceased? May we expect it to be renewed? If so, 
under what conditions? 

4. "Presently the world will be cut up with immigration barriers 
which will never be leveled until the intelligent accommodation of 
numbers to resources has practically equalized population pressure 
all over the globe" (Ross). Is this prediction hkely to be realized in 
the immediate future? 

5. "One needs but compare population pressure in various coun- 
tries today to realize that the real enemy of the dove of peace is not 
the eagle of pride or the vulture of greed but the stork" (Ross). 
Argue for or against population pressure as the primary incentive 
to war. 

6. "Social policy demands an increase in population; the inter- 
ests of native Americans is best served through race suicide. The 



8o CURRENT ECONOMIC PROBLEMS 

necessary result of this antithesis is a peopHng of America with 
foreign stocks." Can this threat be avoided? Is it desirable to 
avoid it? 

6i. Immigration and Industrial Development 

A. The increase in the number of laborers through immigration 
has been one of the complementary conditions which together have 
produced our highly pecuniary, industrial, and urban culture. This 
culture, in its manifold aspects, would have been impossible but for 
immigration. 

B. Readings 226, 227. See also Introduction to VII, 2, 112, 
i5S> 394, 403. 

C. I. Enumerate and appraise our industrial debts to the 
immigrant. 2. In our industrial development why may protection 
and the open door to the immigrant be looked upon as complementary 
forces? 3. Enumerate other factors which have contributed to the 
result. 4. Can responsibihty be quantitatively apportioned among 
these factors? 5. On the whole has immigration contributed a net 
value or a net cost to American culture? 

D. I. "The protective tariff creates a demand for certain kinds 
of labor at the same time that it destroys the demand for certain 
kinds of foreign goods" (Hall). Do you know of a concrete case 
where it has furnished this incentive to immigration? 

2. ''The nature of our expanding industrial system, especially 
the use of machinery, has determined to a large extent the character 
of the immigrants whom we have received." Explain, citing concrete 
evidence. 

3. " 'Birds of passage' perform the highly important function of 
adjusting our labor supply to our labor needs." Is this sound? 

4. "Immigration has brought us a body of adult laborers. Thus 
the expenses of the years of dependence have been borne by foreign 
countries. We receive the net benefits." Do you agree? 

5. "Immigration has contributed greatly to our prosperity by 
supplying us with a multitude of goods at very cheap prices." 
Explain. 

6. Answer for immigration the questions asked about protection 
in problem 5 in section 43, above. 



THE PROBLEMS OF POPULATION 8i 

,7. "Immigration has encouraged a dense population congested 
in cities and crowded in factories and mines. But is it certain that 
it is a more ideal social aggregation than a community of prosperous 
farmers?" (Fetter). 

62. Immigration and Labor Conditions 

A. The fact of immigration is written large in every aspect of 
our industrial society. The problem of immigration bears directly 
or indirectly upon all our social problems. Yet its most immediate 
and direct connection is with the working conditions, wages, and 
standards of life of our industrial laborers. 

B. Readings 228-30. See also Introduction to XI, 41, 55, 56, 
262, 268, 309, 400. 

G. I. Has immigration forced the native worker up, down, or 
out? 2. Show quite explicitly how immigration has affected some 
four or five industrial conditions. 3. If the door be kept open to 
immigrants, can unionism thrive? 4. Has the immigrant been to 
the native laborer a help, a goad, or a menace? 

D. I. ''Immigrants, being mobile and migratory, aid in adjusting 
the supply of labor to the actual demand, thus lessening the rhythm 
of business activity." "The immigrant invasion has caused a larger 
and larger part of the labor force of the country to be invested in the 
production of goods, the demand for which is precarious, thus accen- 
tuating the rhythm of business activity." Where lies the truth? 

2. "Immigrants settle in the cities, thus disturbing the balance 
between urban and rural industry. Maldistribution of labor, rather 
than immigration, is responsible for low wages, unemployment, and 
the extreme rhythm in business activity." Do you agree? 

3. "Like machinery, the immigrants have relieved native laborers 
of heavy and disagreeable toil, and have elevated them to an aristoc- 
racy of labor." Is the analogy correct? 

4. "Immigration has not increased the American population. It 
has merely resulted in a substitution of alien for native stock." Has 
immigration increased the total population? Has it lowered the 
native birth-rate? 

5. "A careful statistical study of immigration and wages in the 
last few years show that immigration has raised wages." "Because 



82 CURRENT ECONOMIC PROBLEMS 

of their lower living standards immigrants will accept wages far 
lower than natives. Thus immigration lowers wages." Show the 
incorrectness of both of these arguments. 

6. "So long as a cheap and seemingly liniitless labor market lies 
open, it is impossible to standardize working and living conditions." 
Why or why not? 

7. "Let the foreigners come in! No American laborer need fear 
the competition of a laborer from any part of the world. In any 
line of work the American is a match for a man of any other nation." 
Admitting the truth of the last statement, may it still be to the 
laborer's advantage to exclude the foreigner? 

63. The Restriction of Immigration 

A. Inevitably we come to the question of "what are we going 
to do about" immigration. As we have found, the quantitative and 
the qualitative aspects of the question are inseparable. It is well, 
however, to consider first proposals of an immediate nature, which 
grow primarily out of the quantitative aspects of the problem. 

B. Readings 231-33. See also 23, 70, 248, 272, 292. 

C. I. In what respect does immigration present a problem 
because of numbers? standards of living? thrift? 2. Why do most 
of the proposals for restriction take a qualitative form? 3. State 
the "pro and con" of the literacy test? 4. Name a simple test, 
easily administered, which would better meet the requirement of 
quantitative restriction? 5. Show concretely what is involved in an 
immigration program. 

D. I. "Employers favor immigration for the reason that they 
favor large families among the poor. They favor immigration for 
the reason that foxes favor large families among rabbits." Is this 
fair? Is it adequate? 

2. Can you reconcile a "tariff for the protection of American 
labor" with an open door to immigrants? Why do those who favor 
the first policy favor the second? 

3. "Whether for quantitative reasons immigration should or 
should not be restricted, depends upon whether the country considered 
as a whole is in a stage of increasing or diminishing returns." Com- 
plete the argument. Is it as simple as this? 



THE PROBLEMS OF POPULATION 83 

4. Discuss the merits and defects of the plan to restrict immigra- 
tion by imposing a high per capita tax upon the immigrant. 

5. ''If a blanket tax of $100 was imposed upon each immigrant 
with the privilege accorded him of going to any place in the country 
at government expense, the maldistribution of labor would be righted 
and the immigration problem would disappear." Are you so sure 
of it? 

6. ''One of our most distinguished citizens has again been taking 
the country to task for race suicide. Admitting his contention that 
our families should be larger, it is likely that a prohibition of immi- 
gration would achieve the end he has in view." Trace the steps by 
which the author of the quotation above probably arrived at his 
conclusion. 

7. "Wages might be raised permanently by forcing American 
employers of foreign laborers to pay them a minimum wage of three 
dollars per day during their first ten years in this country. This 
would amount virtually to a protective tariff upon American labor." 
Discuss. 

64. The Future of the Immigrant 

A. The qualitative problem of immigration, inseparably asso- 
ciated with that which we have just studied, contains imphcitly all 
the problems of our social order. Properly to approach it we must 
determine the kind of a society we wish to produce and the possible 
contributions which alien stocks can make to that culture. Then we 
must formulate a program which will secure immigrants from proper 
stocks and in proper proportions and will give them the training 
necessary to enable them to make these contributions. Thus the 
immigration problem loses its identity in that of the conscious control 
of social development. 

B. Readings 234-38. See also 6, 281, 397-400. 

C. I. State the economic problems demanding an "immigration 
program." 2. Can the economic problems of immigration be con- 
sidered in isolation? 3. What is the problem of Americanization? 
4. By what agencies is Americanization to be effected? 5. Has the 
"transitional quality" given to our social order by the immigrant 
been for the better or the worse? 6. What is the proper place for 
the immigrant in the American culture of the future? 



84 r^' RENT ECONOMIC PROBLEMS 

D. I. "The question at issue is not the personal or racial 
characteristics of the immigrants. These are immaterial. Person- 
ally, I care not if they come from heaven possessed of the divine 
attributes of angels. There are too many of them." Is this argu- 
ment a propos of the issue? 

2. "Since the immigrants are eventually to constitute an indus- 
trial proletariat, unrestricted immigration encourages the concen- 
tration of wealth and the stratification of society on a pecuniary 
basis." "If cheap labor lowers the cost of production, in obedience 
to the laws of value price falls. Thus the benefits go to the consumer. 
Immigration, therefore, can encourage neither the concentration of 
wealth nor the stratification of society on a pecuniary basis." Which 
argument is sound? 

3. Life once published a photogravure of a frieze supposed to 
have been discovered in the ruins of New York City in the thirtieth 
century. It represented an American Indian denied a place in the 
sun by a Dutch trader; the Dutchman removed in the same way by 
an Englishman; the Englishman by a Yankee; the Yankee by an 
Irishman; and the Irishman by a Hebrew. At this point the frieze 
broke off abruptly. Is this a true statement of the law of racial 
survival? 

4. "Because all property eventually comes to market and is 
knocked down to the highest bidder, and because disregard of con- 
ventional standards of expenditure makes a capitalist out of the 
immigrant, the economic race is always to the newcomer." What 
evidence have you of the displacement of "native American" property- 
owners by aliens? Just what part is this "law" likely to play in 
determining the future of the immigrant in America? 

5. ''Our desire for cheap labor has led us to import aliens without 
asking questions about their intelligence, their political ideals, or 
their willingness to become good citizens. Now we are reaping." 
What importance do you attach to this factor in explaining the 
present unrest? 

6. Should Americanization be carried on by the state, by industry, 
or by private organizations? Can you justify making this work a, 
charge against industry? 



THE PROBLEMS OF POPULATION 85 

7. "Why blink sober fact? Immigrants are to be hewers of 
wood and drawers of water. Through immigration we are estab- 
lishing a permanent labor proletariat." Do you accept this con- 
clusion? 

8. "Let the immigration problem alone. In God's good time it 
will settle itself." Show that this is true. How will it settle itself? 

9. "Immigration has induced a development of society at a 
faster rate than we could control it. It is responsible for the acute 
form which many of our social problems take." Give concrete evi- 
dence supporting this statement. Will a solution of the immigration 
problem render others less acute? 

10. "The real problem in immigration is that of the kind of 
society we want America to be." Explain. 

65. The Quality of Population 

A. The problem of eugenics involves the same baffling questions 
as that which we have just studied. We may say quite positively 
that certain classes should be inhibited from reproduction. To say 
what classes and types should reproduce, and in what proportions 
to each other, involves the formulation of a comprehensive and 
adequate social philosophy. 

B. Readings 239-43. See also 8, 238, 305, 346^. 

C. I. Of what importance is it to society to control the birth- 
rates of its several classes? 2. Is reform through eugenics antithetical 
to reform through changes in social environment? through educa- 
tion? 3. Can the biologist produce a social Utopia? 4. What effect 
wiU immigration have upon the quality of our population? 5. Show 
that the problems of eugenics are social rather than merely biological. 

D. I. Enumerate the classes or types which unquestionably 
should not be allowed to reproduce; the classes or types about which 
there is question. Would you include those afflicted with tuberculosis 
in the first class? 

2. "Eugenics is a pseudo-reform urged by conservatives, who 
are opposed to institutional and environmental changes, as a means 
of countering the attack of radicalism." Is reform to be effected by 
changing the "environment" or improving the "population"? How 



86 CURRENT ECONOMIC PROBLEMS 

long have different reformers advocated these different measures? 
Is the charge above true? 

3. At present we have many social conventions and inhibitions 
prescribing the conditions of marriage in the upper and middle 
classes in society. We ar^ beginning to have such conventions 
relative to the number of children. Enumerate these conventions 
and show how through them society is exercising much control over 
its population. Can similar conventions be established among the 
industrial workers? 

4. "The problem of positive eugenics turns upon the question, 
For what are we breeding? That, in turn, is based upon the ques- 
tion. What kind of a society are we trying to develop?" Explain. 

5. ''However smiling the gardens of Daphne, they had always 
to slope down into the huge malodorous quagmire of wretchedness" 
(Ross). Is inability to control population the serpent that will 
forever exclude us from a social Eden? 

66. The Population Problem of Today 

A. In the wake of the war there comes not one but many popu- 
lation problems. There is scarcity of man-power, the pressure of 
population upon subsistence, the demands of peoples new to indus- 
triaHsm for a "place in the sun," the threat of emigration from 
America, and the ever-old, ever-new problem of improving the stock 
of men. Fortunately in these instances, as always, war calls attention 
to the importance of the problem of population. 

B. Readings 244-46. See also 2, 60, 62, 117, 225, 277. 

C. I. Has industrialism relieved population pressure in Japan? 
2. Can emigration from the United States occur on any large scale 
or for any extended period of time? 3. Why does war bring the 
population problem into greater prominence? 4. What aspects of 
the population problem were emphasized by the war? 5. What are 
being emphasized now that the war is over? 

D. I. "A nation newly possessed of the machine- technique, 
organized on a feudal plan, with a large and docile population, is 
always a menace to the peace of the world." Is this true? Examine 
the historical evidence. 



THE PROBLEMS OF POPULATION 87 

2. ''America's abundant resources are mightier than newly born 
nationahstic hopes. The tide of emigration will eventually turn 
into a stream of immigration unless the latter is checked by govern- 
ment action." Comment. 

3. ''The slow growth is the healthier. If immigration remains 
permanently checked, America will have a slower, but a much 
sounder development than will be the case if barriers are removed and 
immigrants are again freely admitted." Examine this argument 
carefully. 

4. "Very soon we may expect to find immigration a great political 
issue. The position of the wage-earners has been materially strength- 
ened of late by the stoppage of immigration. The costs of production 
and the high costs of living have mounted because of a dearth of 
alien labor. These facts insure a conflict of interests that will find 
expression at the polls." Do you agree? 

5. Cite evidence of an interest in public health which has come 
out of the war. In what ways will this aid eugenics? 



XI. THE PROBLEMS OF ECONOMIC INSECURITY 
67. Insecurity under Modern Industrialism 

A. One of the most serious problems which modern industrial 
society has to face is that of insecurity. Security in an economic 
sense there has never been, but the modern problem is complicated 
by the manifold aspects of the development of the pecuniary society 
to which it belongs. 

B. Readings: Introduction to XI, 247-49. See also 24, 26, 
41, 90, 91, 95, 311. 

C. I. Compare the manorial with the modern industrial system 
in respect to economic security. 2. To what extent is insecurity due 
to competition? to the perfection and extension of the machine 
system? 3. What are the principal manifestations of modern in- 
security? 4. Is it hkely that the problem can be solved through an 
extensive insurance program? 

D. I. "Mediaeval insecurity had its source in local disasters, 
such as floods, droughts, and raids. The organization of society on 
a personal basis caused the resulting suffering to be shared by the 
whole group rather than to be confined to particular classes or indi- 
viduals." In harmony with this statement, contrast mediaeval and 
modern economic security. In what respects is the foregoing state- 
ment inaccurate? 

2. "The machine system, production on a large scale, pecuniary 
competition, dependence on distant and future markets, the inter-' 
locking scheme of prices, the violent rhythm of the economic cycle, 
and the onward rush of the industrial system into an unknown future 
prevent one from knowing what is in store on the economic morrow." 
Connect each of the characteristics of the industrial system mentioned 
with the problems of economic insecurity. 

3. "Because of the delicate pecuniary organization of society the 
consequences of a failure of the industrial machine at one point are 
dissipated through the whole of the economic order. Thus the 
burdens of economic insecurity are much smaller than they would 



THE PROBLEMS OF ECONOMIC INSECURITY 89 

be under a non-pecuniary organization." Develop this argument. 
Can you support it? 

4. "Under our system economic insecurity is the lot of capital 
as well as of labor." Explain. 

5. "Industrial insurance is no solution of the problems of eco- 
nomic insecurity. It substitutes for an analysis of those problems an 
accurate accounting of industrial risks; for an attempt at solution 
an endeavor to distribute the risks with the minimum of burden." 
Explain fully. Do you agree? 

68. Unemployment 

A. The most conspicuous manifestation of economic insecurity 
is unemployment. The name is used to denote, not a single problem, 
but a number of problems unlike in all respects except that they deal 
with classes or types of labor "out of jobs." To deal intelligently 
with the problem an analysis of the various types must be made, the 
fundamental sources of each must be discovered, and means must be 
found for controlling these. In its entirety the problem involves 
many other economic problems and calls for an elaborate and long- 
time program. 

B. Readings 250-54. See also 54, 63, 89, 96, 384. 

C. I. Draw up a classification of the causes of unemployment. 
2. List and describe the types of unemployment. 3. State the case 
for "an adequate organization" of the labor market. 4. Draw up a 
plan for an adequate organization of the labor market. 5. Outline 
the "theory of buffer employment." 6. What principles should 
govern the relief of unemployment? 7. Can adequate protection 
against unemployment be afforded by insurance? 

D. I. "Under the manorial system both serf and lord had rights 
in the serf's labor, and both lord and serf had rights in the lord's land. 
Under the modern system all rights in labor have been concentrated 
in the laborer and all private rights in property in its owner. This 
change in property rights and the consequent necessity of bringing 
labor and property together through contract have much to do with 
the nature of modern unemployment." Explain in detail. 

2. "Fundamentally the problem of unemployment is one of the 
organization of the industrial system." Demonstrate. 



go CURRENT ECONOMIC PROBLEMS 

3. "Unemployment is evidence that labor is asking too much. 
It can be relieved when, and only when, labor is willing to take a 
wage based upon the value of its services." Show that this is a mis- 
conception of the problem of cyclical unemployment. 

4. "The determination of values under competitive conditions 
may be depended upon to protect the pecuniary interest of those 
engaged in seasonal occupations." Does it render full protection? 
Does it solve the larger problem of enabling society to make the 
best use of its available labor supply? 

5. "The volume of business is constantly expanding and con- 
tracting. Labor is not flexible enough to make an immediate response 
to these changes in the volume of- trade." Explain in detail. What 
labor force, for this country at least, brings about a partial adjust- 
ment? With what larger problem is the problem of cyclical unem- 
ployment merged? 

6. May the problems of unemployment be expected to become 
less acute if the pecuniary organization of society is perfected? if 
the rhythm of the trade cycle is lessened? if our tariff policy becomes 
more stable? if the railroad systems are brought under government 
ownership? if regulated monopoly displaces competition quite exten- 
sively? if the volume of immigration is reduced? if the government 
prescribes conditions of employment and rates of wages? if collective 
bargaining becomes universal? if industrial development proceeds at 
a slower rate? if society adopts socialism? What is your conclusion? 

69. Industrial Accidents 

A. The problem presented in industrial accident reveals, not only 
an important manifestation of economic insecurity, but inability of 
the common law formulated under a tool regime to deal properly 
with conditions associated with the machine technique. Its solution 
involves both a reduction of industrial accident to a minimum 
and a socially equitable distribution of the costs incident to industrial 
casualties. 

B. Readings 255-61. See also 18, 52, 344, 369. 

C. I. What can be done to reduce industrial accident incident 
to the machine process to a minimum? Who can do it? 2. Can 
individual responsibility for industrial accident be determined? 



THE PROBLEMS OF ECONOMIC INSECURITY 91 

3. State and criticize the "theory of neghgence" as a means for 
placing the incidence of work accidents where it belongs. 4. What 
are the social costs of allowing the incidence of work accidents to 
rest with injured workmen or their fellow-employees? 5. Make out 
a case for or against the necessity of employer's liabiHty. 6. Do you 
favor or oppose compulsory workmen's compensation? on what 
grounds? 

D. I. "Under the craft system, where tool-methods of produc- 
tion were used, and the employees were few in number, individual 
responsibility for accidents could be directly imputed, and the theory 
of negligence worked substantial justice." Defend this statement, 
making use of two or three h3^othetical illustrations. 

2. "A wheel of a machine in a factory contains a defective piece 
of material. Because of this the wheel one day comes off, injuring 
the workman in charge. The machine has been properly inspected 
by state officials." Impute individual responsibility for the accident. 

3. By citing three or four illustrations of your own, show the 
impossibility of applying the doctrine of "assumption of risk" under 
modern conditions. 

4. If "employer's liability" is deemed advisable, should the law 
be made to apply to miners, factory operatives, machinists, locomo- 
tive engineers, drug clerks, errand boys, household servants? 

5. "Under the competitive system the incidence of work acci- 
dents, even if legally assessed, does not fall upon the employer. He 
adds it to the price of his product and it is paid by the consumer." 
Explain in detail. Is "employer's liability" merely an insurance 
scheme? 

6. Show how the losses incident to workmen's compensation can 
through the principle of insurance be reduced to a regularly recurring 
charge against industry. In this case the costs are eventually borne 
by whom? 

7. "Workmen's compensation and insurance is a mere device for 
making the consumer of goods pay for the human wear and tear 
incident to their production." Explain in full. Do you agree? 

70. Sickness and Health 

A. Sickness and health are incident to all life. Yet under the 
modern machine system physical well-being is doubly essential to 



92 CURRENT ECONOMIC PROBLEMS 

production and to a wise national economy. The problems pre- 
sented are two in number: first, the conservation of the health of 
the industrial population through "preventive medicine"; and 
second, the equitable distribution of the cost of illness and pre- 
mature death. 

B. Readings 262-66. See also 41, 11.7, 239, 305, 321. 

C. I. Should a national "health survey" be made? 2. Make an 
estimate of the physical efficiency of the working population of the 
United States. 3. Make an estimate of the economic cost due to 
sickness. 4. Sketch a program which will result in greatly reducing 
this cost. 5. Should such cost as is left be borne wholly by the 
individuals affected? 6. Can the British national insurance scheme 
be used in this country? , 7. Is the pension plan the one best adapted 
to dealing with dependent old age? 

D. I. "Because of its highly specialized nature and its capacity 
to utilize a myriad of different kinds of services, modern industrialism 
comes much nearer than any other system to providing renumerative 
employment for the partially disabled." Illustrate with examples 
from personal observation. What changes in the industrial system 
or in the acquired productive powers of individuals can make this 
provision more ample? . 

2. What can "preventive medicine" do to decrease the amount 
of dependence ? immigration laws ? eugenics ? child-labor laws ? 
compulsory education? a broader basis for vocational education? 
Enumerate other agencies which can be used in the program to 
minimize the costs of dependence. 

3. Provision for sickness and old-age benefits can be made by the 
state, by the employer, or by the laborer himself. Give the argument 
for and against each scheme. Draw up a scheme alike practicable 
and compatible with your social ideals. 

4. "Schemes such as these, involving compensation for industrial 
accidents, sickness benefits, and old-age pensions, strike at the cardinal 
principle of our civilization. Self-control, self-reliance, self-provision, 
and self-respect lie at the basis of all individual freedom. It is at 
these things that such socialitic schemes strike." Is the point well 
taken? 



THE PROBLEMS OF ECONOMIC INSECURITY 93 

5. "Provision for the destitute through benefits and pensions 
makes bad matters worse by taking away the incentive to thrift." 
Do you agree? 

71. The Standard of Living 

A. Because its upper Hmit is determined by pecuniary income, 
which is subject to all the caprice of the market, ''the standard of 
living" is, and must remain, a manifestation of economic insecurity. 
It has for us the added interest that it is a factor of prime importance 
in the tariff, immigration, trade-union, and minimum-wage problems. 

B. Readings 267-68. See also 130, 219, 222, 230, 288. 

C. I. What is the economic importance of the standard of living?- 
2. Is the evidence of low living-standards indicative of faults in the 
economic system or of inefficiency on the part of the laborers? 3. Is 
the standard of living a "national" or a "class" affair? 4. What 
effect has the war had upon the standard of living? 5. Is a "fair liv- 
ing wage" an economic or an ethical concept? 

D. I. On the basis of prices in your city, determine how a 
family, consisting of father, mother, and a child of eight, should 
apportion its income of $800 per year; $1,700 per year; $4,000 per 
year; $8,000 per year. After drawing up the four budgets compare 
the percentages in each representing expenditure for food, rent, 
clothing, etc. What conclusions do you draw? 

2. "Immediately, wages determine the maximum standard of 
living for the laboring class; ultimately, the standard of living may 
determine wages." Explain the paradox. 

3. "In every family there is a struggle between the standard of 
living, savings, and unborn children." Explain. Show the economic 
importance of the alternative solutions of the problem presented in 
the struggle? 

4. Should a "fair living wage" be sufficient to support one, two, 
four, six, or ten? Should it be able to yield this support if very 
economically used, if spent with some waste, or if lavishly used? 
Should it yield the bare necessities of life, certain comforts in addi- 
tion, or a few luxuries in addition to the comforts? What are neces- 
sities? comforts? luxuries? Is a "fair living wage" a scientific concept? 



94 CURRENT ECONOMIC PROBLEMS 

72. The Minimum Wage 

A. Various proposals have been made to estabHsh higher Hving 
standards by legally raising wages. These proposals are devious, 
one modestly limiting itself to the sweating industries, another more 
broadly to "all occupations open to women," a third quite hopefully 
to "all unskilled labor in general," and a fourth boldly proposing "a 
schedule of minimum rates for all occupations employing manual 
labor." They are alike, however, in proposing, directly or indirectly, 
the substitution of an "authoritative" for a "competitive" wage. 
This section can do nothing more than indicate the larger issues 
involved in these proposals. 

B. Readings 269-74. See also 70, 73, 290, 304, 306, 350, 383, 

384, 385. 

C. I. What economic and social conditions are responsible for 

minimum- wage proposals? 2. Enumerate the proposals, analyze 
them, and state the issues involved in each. 3. What legal and con- 
stitutional difficulties impede minimum-wage legislation? 4. Enum- 
erate and pass judgment upon the validity of the economic arguments 
urged against these proposals. 5. Draw up a minimum- wage pro- 
posal, supplemented, if necessary, by other proposals necessary to 
make it practicable. $. Could compulsory arbitration be made to 
work under American conditions? 

D. I. "The principle of the minimum wage can be simply 
stated. Its aim is to compel the employer to pay the laborer enough 
to make possible the labor which he utilizes." Explain in full. 
Compare the principle with that of workmen's compensation. 

2. "The enactment of a minimum wage for unskilled working 
women would in all probability lead to one or more of the following 
results: numerous and varied evasions of the law; substitution of 
more efficient for less efficient labor; substitution of male for female 
labor; an increased use of machinery; a rise in the price of goods; 
and an increase in unemployment." What extension of government 
authority would be necessary to prevent failure through the devices 
enumerated? 

3. "Quite likely the minimum wage would increase prices of 
commodities. Since in general unskilled labor consumes the goods 
which it produces, laborers would, in the end, pay in increased prices 



THE PROBLEMS OF ECONOMIC INSECURITY 95 

what they receive in increased earnings." What is the weakness in 
this argument? 

4. ''In connection with the minimum wage the question of 'To 
whom?' is easily disposed of. The question of 'From whom?' is fully 
as important, being fraught with grave consequences to society." 
Mention several sources from which the increase in wages might come. 
State the probable consequences of taking it from each of these 
sources. 

5. "The increased wages will probably come from the parts of 
the incomes of capitalists which otherwise would be saved. Thus 
the proposal, by threatening to decrease capital, threatens still lower 
competitive wages in the next generation. This tendency is likely 
to prove cumulative." Do you agree? 

6. "Under minimum-wage laws, rates of wages will soon become 
established. Their very inflexibility will be a serious obstacle in the 
way of the organization of a society as dynamic as ours upon a pecu- 
niary basis." Explain this difficulty in detail. Just how real is it? 

7. "The beneficial results of a minimum wage come only in the 
less immediate future. If it be made to fix an ideal, and if it be 
properly supplemented by social conventions and laws designed to 
decrease the number of laborers, to establish higher living standards 
among them, and to increase their productive efficiency, it may 
eventually accomplish all of its objects." Is this long-time chance 
worth taking? Is it possible that without it the other proposals 
mentioned might accomplish its objects? 

73. The Hazards of the Child 

A. The most important of all questions of insecurity is that of 
the hazards of the child. From birth — and before — until his occu- 
pational status is definitely fixed, the child has to run a long series of 
chances. Only as these are successfully avoided are his latent 
capacities developed into usable powers. Only as these perils are 
escaped are the human resources of society properly conserved. 

B. Readings 275-80. See also 8, 53, 127, 222, 305, 330, 397-400. 

C. I. What is the economic value of decent birth? 2. Why does 
th€ industrialization of a country place a strain upon childhood? 
3. In what respects are the child's opportunities for development 



96 CURRENT ECONOMIC PROBLEMS 

conditioned upon the parental income? 4. State the case for and 
against child labor. 5. Outline the argument underlying the decision 
of the United States Supreme Court in the first child-labor case. 
6. Did this decision dispose of the question at issue? 

D. I. ''The new industrial system did not bring its own stand- 
ards. For a time an attempt was made to apply the customs and 
standards of a craft and rural society." Give a historical account 
of child labor in industrial society. Account for the great human 
cost involved. 

2. "The natural law of free competition will settle the problem 
of child labor. Under its uniform operations those human resources 
will be conserved which are worth more at a later date. Only those 
will be used which are more valuable in the present than in the 
future." What happens to this theory when put to the actual test? 

3. "Every child has a natural right to be born of healthy and 
decent parents; to be born into a home with an atmosphere of 
healthy living and thinking; to enjoy the natural opportunities of 
children for health, play, and physical development; to have an 
opportunity to have the best of its talents developed; and to be given 
competent knowledge of the social and industrial world to which it 
has to adjust its life and thought." Would you incorporate any or 
all of these provisions in a "Modern Bill of Rights" ? 

4. "He who has gifts has a right to their development." Would 
you make opportunity the same for the child of rich and of poor 
parents? If not, in what respects would you discriminate? What 
principle underlies your discrimination or your failure to discriminate? 

5. "Our division of police power between the federal and the state 
governments is sadly at variance with the facts of industrial life." 
What evidence for or against this statement is afforded by our attempt 
to deal with child labor? 

6. "The problem of child labor is not one but many. Its concern 
is the formulation of a list of standards governing the employment of 
children." Explain in full. 



XII. THE PROBLEMS OF UNIONISM AND THE WAGE 

CONTRACT 

74. Group and Class Consciousness 

A. As the social system incident to the machine culture becomes 
more rigid, the workers see more clearly that they constitute a real- 
tively permanent proletariat. There develops accordingly a feeling 
of an indentity of interests within -the class, or the group, and of a 
conflict of interests between classes or groups. This "class" or 
"group" consciousness finds its chief expression in attempts, through 
"trade" or "industrial" unions, to increase the welfare of the class 
or group. The problems in which "class consciousness" is a factor 
embrace the whole life and interests of the worker. 

B. Readings: Introduction to XII, 281-85. See also 54, 56, 

366, 367, 396. 

C. I. Account for the slow development of class consciousness 
in America. 2. In what essential respects are the interests of the 
"bourgeoisie" and the "proletariat" in opposition? 3. What advan- 
tages to the workers inhere in organization? What advantages to 
society in the organization of workers? 4. Give evidence showing 
that the consciousness which has developed in America is of the 
group rather than the class. 

D. I. Fundamentally, are the interests of laborers of the same 
group identical? the interests of different groups of laborers? the 
interests of capitalists and laborers? 

2. "Codes of medical and legal ethics are but the expression of 
the pecuniary interests of the groups in question." Discuss, citing 
examples. Why should a consciousness of the identity of interests 
of the members of the group have arisen so early in the professions? 
Why should it have come earlier among groups of skilled than among 
groups of unskilled laborers? 

3. "Under the present economic order the laborer and the capital- 
ist alike gets what he produces." Under the present system does 
each man produce an individual product? Does he produce a definite 
part of a joint product? How can you tell what he does produce? 

97 



98 • CURRENT ECONOMIC PROBLEMS 

4. "Because of the economic necessity resting upon the owner to 
protect and conserve the capital which he has invested in his slave, 
the system of chattel slavery made far better provision for the welfare 
of the laborer than does that of wage-slavery." Defend or attack 
this statement. 

5. "The desire of the laborer is to make as much as possible out 
of his life as a whole. Since under the wages system contracts are 
for short periods, the employer desires to. get as much as possible out 
of the laborer during the legal term of employment." Does unregu- 
lated competition give the employer any alternative? What has the 
open door to immigrants to do with the matter? Is the antithesis 
stated above a correct one? If so, in what problems does it find 
expression? 

75. Viewpoints and Unionism 

A. The activities of groups of- laborers and capitalists alike 
spring from judgments. Now judgments are premised not so much 
upon real interests as upon conceptions of interests. Accordingly, to 
understand aright the programs of industrial groups we must know 
something of the 'Viewpoints" of those responsible for them. 

B. Readings 286-88. See also 22, 25, 240, 310, 311, 337, 338. 

C. I. What theory underlies Hoxie's account of the viewpoints 
of the capitalist and the trade-unionst? Do you accept it? 2. What 
distinction do you notice between the two parts into which almost 
every article of the "economic creed" can be divided? 3. What dis- 
tinctions in viewpoint and principle do you note between the 
"economic creed" and the "industrial creed"? Account for the 
differences. 4. Is there at present a creed common to employers? a 
group of principles believed in by all unionists? 

D. I. "If the theory of the 'types of unionism' is true, there 
can be no viewpoint common to laborers." Do you agree? 

2. "Social life is an extremely complex thing. One belongs, not 
to a single, but to many, different groups. In America, therefore, 
there can be no such thing as a group or a class viewpoint." Illus- 
trate for individuals in the middle class. Does the conclusion apply 
to the proletariat? 



UNIONISM AND THE WAGE CONTRACT 99 

3. "Under industrialism our scheme of conventions and inhibi- 
tions, legal and social, has as its objective the preservation of the 
pecuniary interests of them that have." How can laws and social 
conventions reflect class interests? Defend or attack the statement 
above. 

4. "Christianity preaches self-sacrifice, content, leaving vengeance 
to God, and patiently waiting for a reckoning in the next world. Thus 
it is one of the most powerful instruments in the preservation of the 
capitalistic system." Show that there can be nothing in this. 

5. "True patriotism demands absolute loyalty to our Constitu- 
tion, our legal system, and our established and tested social arrange- 
ments." Why does it? What condemnation should be heaped on 
the laborer because of his stinted loyalty to American traditions and 
institutions? 

6. Why do employers generally talk in terms of national and 
social welfare and laborers in terms of group and class welfare? 

76. The Theory of Unionism 

A. Unions there are in infinite variety, serving an indefinite 
number of immediate purposes. Each, however, is intent upon serv- 
ing the material interests of the group composing it, and, to a lesser 
extent, those of organized labor as a body. To accomplish this object 
each strives to build up a spirit of group solidarity and insists strenu- 
ously upon the necessity of group action. For the realization of its 
end unionism attempts to establish such conditions as will effectually 
preserve the solidarity of the group or class and cause it to act as a 
unit. The epitome of union theory is the "principle of uniformity," 
in terms of which all union conventions and practices find their 
expression. 

B. Readings 289-92. See also 312, 318, 319, 347, 348, 349, 384. 

C. I. Explain the meaning, the purpose, and the importance of 
the principle of uniformity. 2. Explain collective bargaining, the 
closed shop, control of technique, and control of apprentices in 
terms of this principle. 3. Show by concrete examples the value 
of collective bargaining to unionism. 4. State the economic argu- 
ments for and against the closed shop. 5. Is the closed shop ethically 
defensible? 



lOO CURRENT ECONOMIC PROBLEMS 

D. I. ^'Individual competition may be depended upon to secure 
justice to employer and employee alike. Therefore, in a democracy 
there is no place for a union, which is virtually a monopoly of labor." 
Develop this argument in detail. What assumptions underlie it? 
Do you accept its conclusion as a valid statement of social policy? 

2. "Unionism represents a vast monopoly of skilled labor which 
waxes fat at the expense of unskilled labor and the general public." 
Do you agree? 

3. "Under a system of free contract it is hard to establish a spirit 
of group solidarity so long as the open door to immigrants gives a 
transitional tendency to all industry." Explain. 

4. "The 'hiring and firing system' aims at productive efficiency 
at the expense of a conservation of human resources and a realization 
of the fulness of life by the laborer. Unionism aims at a modification 
of the rigidity of the system to give a larger life to the laborer." Is 
this a correct statement of the aims of unionism? 

5. Distinguish between industrial and trade unionism. 

6. "Trade unionism is not a labor movement. It is a mere 
attempt to sell a definite commodity, labor, at the highest price. Its 
aims are business aims." Do you agree? 

7. "The spirit of collective activity underlying unionism is 
antithetical alike to our individualistic political and legal system and 
our pecuniary organization of society." Show that this antithesis is 
real. What fundamental problems does it involve? What other 
tendencies or proposals considered in this course have the same anti- 
individualistic character? 

8. "The closed shop, finding expression in a complex and detailed 
ritual as to technique, workmen, and materials, strikes at the very 
root of productive efficiency." Cite examples showing wastes incident 
to these minute rules. Defend or attack the statement above. If 
the statment is true, is there any defense left for the closed shop? 

9. "The levying of customs duties, the exclusion of aliens, the 
drawing of the color line, and the admission of the select few to a 
sacred social circle are all expressions of the closed shop." Do you 
agree? Are these practices defensible? Point out examples of the 
"closed shop" practiced by capitalists. On what ground can the 
closed shop be defended? 



UNIONISM AND THE WAGE CONTRACT lOi 

10. "In two respects unionism strikes at the very basis of our 
civilization: first, by insistence upon 'uniformity' in wages, it denies 
to the talented and ambitious man a chance to rise, thus discriminating 
in favor of mediocrity; and second, by the closed shop, it denies to the 
non-union man his God-given right to make a living for himself and 
his family by working at his trade." Appraise this attack upon 
unionism. 

11. ''The ideal institution, calculated to preserve the rights of 
unionist, non-unionist, employer, and public, is the closed shop with 
the open union." Is such a thing a contradiction in terms? 

12. "By control of hiring and discharge, the technique of work- 
manship, and the condition of employment, the union can win for 
its members economic security. By collective bargaining it can 
virtually establish the prescribed conditions permanently. Thus, 
within the law, labor can win back the equities in property which it 
possessed under the manorial system." Under what conditions can 
this program be fulfilled? Is it likely to be fulfilled? Would a reali- 
zation of it be advantageous to union laborers? to the employers? 
to the public? 

77. The Weapons of Industrial Conflict 

A. The realization of their divergent ends involves labor unions 
and employers in a perpetual "industrial conflict." Strikes and 
lockouts are but the most obvious manifestations of this struggle. 
The unions use many other weapons adapted to their purposes, and 
plan short-time and long-time campaigns with consummate strategy. 

B. Readings 293-300. See also 307, 313, 343, 347, 348, 380. 

C. I. What means are used by unions to secure a spirit of group 
solidarity? Are they effective? 2. What "weapons" are used to 
force their demands upon employers? How effective is each? 
3. What weapons have been perfected by employers for resisting 
the demands of the laborers? 4. What prime object lies back of 
the organization of "employers' associations"? 5. Account for the 
weakening in the strategic position of organized labor in the ten years 
preceding the war. 6. Has the war increased or decreased the 
strategic position of organized labor? 



102 CURRENT ECONOMIC PROBLEMS 

D. I. ''The employer is an opponent worth fighting; the 'scab' 
is an anti-social traitor who has no rights to be respected." Why 
do unions find it necessary to encourage such feelings against scabs? 

2. "Every weapon used by the unions finds, its complement in a 
similar weapon used by the employers." What is the complement of 
the strike? the boycott? Show instances in which the parallelism 
does not hold. 

3. "The boycott, for its success, depends upon publicity; the 
blacklist, upon secrecy. Therefore the conspiracy laws are much more 
easily enforced against the former than against the latter." Explain 
in detail. 

4. Present the arguments for and against the legalization of the 
boycott. On which side does the balance lie? 

5. "The sympathetic strike is a necessary agency in the realization 
of the union program." What objections are usually advanced 
against the sympathetic strike? What theory underlies the argument 
in its favor? 

6. "The presence of large increments of immigrant labor has 
robbed some of the most powerful union weapons of their efficiency." 
Explain in detail. 

7. "Through co-operation, careful study of the problem, and 
vigorous action employers' associations have reduced strike-breaking 
to an exact science." Explain fully. What influence has this had 
upon the strength of unionism? upon the future program and 
activities of unionism? 

78. Unionism in War Time 

A. The status of unionism in America was definitely affected 
by the war. First, the direct confiict between unions and employers 
was for the moment suspended. Second, an attempt to hold laborers 
responsible for production led to an extension of unionism. Third, an 
attempt to realize war aims through the unions led to changes in 
union policy and principles. 

B. Readings 301-3. See also 116, 117, 122, 123, 131. 

C. I. Account for the importance of labor in the war program. 
2. Was there really a "truce" between "labor and capital" during 
the war? 3. Why did the government prefer to deal with unions 



UNIONISM AND THE WAGE CONTRACT 103 

rather than with laborers individually or with them through their 
employers? 4. Was the war tendency an encouragement to trade or 
to industrial unionism? 5. To make labor productively efficient the 
government found it necessary to give attention to what aspects of 
the labor problem? 

D. I. Can the competitive bidding of governmental depart- 
ments for industrial laborers be justified, when the government is 
conscripting men for military service? Should men have been con- 
scripted for industrial service? Should industry have been con- 
scripted? 

2. "The war proved the impossibility of holding to accountability 
for production laborers organized along trade lines." Is this true? 
Could responsibility be placed in unions organized along industrial 
lines? 

3. "During the war labor took advantage of the scarcity of man- 
power caused by the military draft to demand higher wages. Thus 
they received a surplus over and above their fair wages and properly 
chargeable to government policy." Examine this argument care- 
fully. 

4. Does war tend to promote or to encourage: a reduction of 
the hours of labor? the prohibition of night work for women? 
Sunday labor? an improvement in sanitary conditions? an increase 
in wages? 

5. Examine the purpose, function, history, and accomplishment 
of the War Labor Board; of the War Labor Policies Board. What 
has been the net effect upon current conditions of the activities of 
each? 

79. Woman's Invasion 

A. The scarcity of labor during the war led to a re-examination 
of woman's capacities for industrial labor and of the tasks for which 
she was fitted. In addition changes in organization and technique 
were made to render suitable for women tasks which had formerly been 
regarded as belonging to men. But what has been done cannot be 
easily undone, and in many cases women have been admitted to 
particular trades for good. 

B. Readings 304-6. See also 53, 127, 222, 246, 276, 331, 346, 
3^3y 384. 



104 CURRENT ECONOMIC PROBLEMS 

C. I. What is meant by the dilution of labor? 2. To what 
extent were women drawn into industry in this country during the 
war? 3. What new problems in organization, technique, and work- 
ing conditions were presented by the new army of women workers? 

4. How is the health of working women properly to be conserved? 

5. Do women war workers wish to remain? Do their employers 
wish to retain them? Is it to the public advantage that they should 
remain? 

D. I. "The war clearly revealed as a source of great economic 
loss the idleness of a large proportion of the women of the country." 
By means of the census reports and other data, determine the num- 
ber and percentage of women above childhood who are not produc- 
tively employed. What is the social loss? 

2. Account for the fact that society has in the past been making 
far more use of its male than of its female resources. 

3. What trades are primarily men's trades? What primarily 
women's? Are units of each usually located in the same neighbor- 
hood? 

4. "The entrance of women into industry should be welcomed 
by men. Their earnings increase the family income and enable its 
members both to work more efi&ciently and to enjoy more of the 
good things of life than they could without such additional income.' ' 
Cite evidence in support of this statement," 

5. "Men should oppose the entrance of women into industry. 
They can be had for lower wages than men receive. Hence their 
entrance into industry tends to drive down wages." Cite evidence 
in support of this statement. Which of the two statements above is 
correct? 

6. Did society lose anything when the women war workers 
entered industry? 

80. Revolutionary Unionism 

A. With the development of our highly industrial, pecuniary, 
and urban culture there springs up a spirit of revolutionary protest. 
This has been quickened by the war and by the activities of labor in 
European countries since the war. To some extent this manifests 
itself in independent organizations, but it is appearing to a greater 



UNIONISM AND THE WAGE CONTRACT 105 

extent than ever among the rank and file of unionists. Its study 
reveals class consciousness in its most extreme form. 

B. Readings 307-9. See also 311, 313, 327-29. 

C. I. Account for the presence in this country of revolutionary 
unionism. 2. Sketch and criticise the proposed syndicalistic organi- 
zation of society. 3. Cite examples of different kinds of sabotage 
which have come under your own observation. 4. Is sabotage con- 
fined to the industrial unions? to labor unions? to the laboring 
class? 5. Could a general strike succeed? 6. Of what value is 
revolutionary unionism in a general study of the labor problem. 
7. Under what conditions does radicalism thrive? Do those condi- 
tions exist in this country? 

D. I. "Revolutionary unionism will not become an organized 
movement in this country. Our natural resources are too abundant 
and our population is too far from the starvation line for that." 
Discuss. 

2. Syndicahsm took its rise in France. Out of what sort of an 
industrial environment did it spring? Enumerate the leading differ- 
ences between the industrial systems of France and of the United 
States. Is it compatible with American industrial society? with 
the current labor movement in this country? 

3. "The very success of the employers in checking unionism 
is the chief cause of the rise of revolutionary unionism. Sabotage 
can be apprehended by no policemen and dragged into no court." 
Is the first statement true? Are laborers likely to find sabotage a 
useful weapon? 

4. What is an "intermittent strike"? Is it to be classified as a 
strike or as sabotage? Is it an effective weapon for direct action? 

5. "The use of sabotage is attended with grave social dangers. 
It makes the laborer himself the judge of whether he is given his 
right; it encourages a spirit of disregard of productive efficiency; 
and it threatens the whole pecuniary organization of society." Show 
by concrete examples how real and threatening these dangers are. 

6. "The general strike can never succeed, for the class which 
would suffer first from it would be the industrial workers." Do 
you agree? 



XIII. THE PROBLEM OF CONTROL WITHIN INDUSTRY 

8i. Unrest 

A. Production is an affair of the mind and the will as well as of 
the hand. It requires personal application as well as organization. 
There may be differences between the parties to production over 
wages, hours, and conditions of employment. But there should be 
none over the importance of production and the application of their 
efforts. To the end of making industry an instrument of the com- 
monwealth causes of unrest must be eliminated. 

B. Readings: Introduction to XIII, 310, 311. See also 22, 24, 
25> 247, 250, 268, 309. 

C. I. Is the unity which war brings real or only apparent? 
2. Was the prediction of the Garton memorandum realized at the 
end of the great war? 3. Enumerate the basic causes of industrial 
unrest. 4. What current value has the portrayal of unrest in war 
time? 

D. I. "War brings, not peace, but a truce in the industrial 
struggle. At its termination the old hostilities will revive, stronger 
than before because of their temporary suppression." Make a his- 
torical test of this statement for the period following the Civil War 
in the United States; the period following the Great War in the 
United States; the period following the Great War in England. 

2. "To get rid of unrest, get rid of the disturbers." "To get rid of 
unrest get to its root and deal with its fundamental causes." Con- 
trast these two attitudes. Characterize the programs to which they 
lead. 

3. "Labor has a load to carry, and the public must not let it 
shirk." "No person or group can perform its real service to the com- 
munity if he or it is conscious of grave injustice from that community." 
Where lies the truth? 

4. "The way to cure unrest is to take away from the laborer the 
right to strike." Argue for or against this proposition. 

5. Outline a program for getting at the real causes of industrial 
unrest and of treating them in a constructive fashion. 

106 



PROBLEM OF CONTROL WITHIN INDUSTRY 107 

82. Output 

A. The problem of output is the problem alike of industrial 
engineering and of economics. It is the problem of giving the com- 
munity in exchange for its limited resources the maximum of the 
good things of life. It will never reach an adequate solution. It is 
constantly receiving a new statement and getting answered in new 
terms. 

B. Readings 312-14. See also 89, 116, 126, 136, 197, 291, 383. 

C. I. Distinguish between output as a technical and as an 
economic problem. 2. Compare the problem as it exists in an agri- 
cultural and an industrial society. 3. Define and give examples of 
sabotage taken from several different aspects of life. 4. Why is the 
problem of the increase of production of greater moment than it was 
before the war? 

D. I. Show that the problem of national, social, or community 
economy is primarily a problem of output. 

2. Show that the problem of the high cost of living, if it is general, 
is a problem of output. 

3. "Work and save." How adequate is this as a solution of the 
output problem in an agricultural society? a craft society? an 
industrial society? 

4. Show how ouput is involved in each of the following problems: 
the adequacy of pecuniary competition to direct industry; the 
rhythm of business activity; the organization of national wealth for 
war; the regulation of international trade; the regulation of monop- 
oly; the restriction of immigration; the conservation of human 
resources; the unionization of labor; the promotion of efficiency; 
vocational education. 

5. List the following factors in the order of their importance to 
the question of increasing production: hard work by laborers; 
making technical knowledge available; saving; co-operation in buy- 
ing; the improvement of technique; the advance of scientific dis- 
covery; improvement in shop management; organization of work 
within the shop; organization of establishments by industries; 
articulation of industries into an industrial system; reduction of the 
rhythm of the business cycle; standardization of goods and processes; 
extension of vocational education; creation of responsibility for 



lo8 CURRENT ECONOMIC PROBLEMS 

output among employers; creation of responsibility for output among 
workers. Add to the list factors of importance which are omitted. 
6. An industrial conference is called by the President to consider 
the high cost of living. Show that the real problem is one of increas- 
ing production. Draw up a program, listing the topics which such 
a conference should discuss, in the order which best connects them 
one with another. 

83. Efficiency 

A. Efficiency is important both because of its connection with 
the problem of increased production and because it presents a point 
of conflict between employers and laborers. In its terms is evident 
the clash of viewpoints and assumptions which underlie their respec- 
tive programs. There was a time when "efficiency" meant "scientific 
management" in the technical sense. But at present it connotes 
something much more human and much broader than an organization 
of the mere mechanics of production. 

B. Readings 315-21. See also 51, 52, 55, 215, 384, 393. 

C. I. Account for the great attention recently given to scientific 
management. 2. What improvement does scientific management 
propose in organization, management, choice of man, planning. 
3. What incentives does it offer the laborer to apply himself more per- 
sistently and intelligently to his work? 4. Are the objections to it 
urged by the unions group, class, or social objections? 5. What 
advantages may be expected from it to the employer? the laborer? 
the public? 6. Why has "employment management" recently 
become of importance? 7. Is "industrial physiology" essential to 
efficiency? 8. What factors are overlooked by those who try to find 
efficiency in technique? 

D. I. "The primary social problem is that of production. 
Solve that and the problem of distribution will take care of itself." 
Develop the argument. Do you accept it? 

2. "Scientific management, by increasing productive efficiency, 
will decrease costs of production. Since, under competition, a new 
scheme of prices will be established, based on new costs, the general 
public will be the only permanent gainer from the change." Connect 
this with the principle that society is best served by each serving his 
own pecuniary interest. Is it valid? 



PROBLEM OF CONTROL WITHIN INDUSTRY 109 

3. ''Scientific management is a mere device for securing the 
maximum from laborers. It selects them carefully, gives each just 
the proper quantum of training, strips them of their labor power 
through artificial wage incentives, scraps them like old machinery, 
and starts afresh with a new group of carefully selected laborers." 
How much is there in this argument? What have competition and 
short-term labor contracts to do with it? 

4. "By its usurpation of the control of technique, scientific man- 
agement threatens to rob laborers, individually or collectively, of the 
property rights which at present they possess in their trades." State 
this argument more fully. What validity has it? 

5. ''Scientific management and unionism are in irreconcilable 
conflict. The former gives control of the business to the employer, 
tends toward specialized tasks and hence individual bargaining, and 
threatens a premature using up of the laborer's productive contribu- 
tion. The latter insists upon union control of technique, collective 
bargaining, and the conservation of the resources of labor." Examine 
this alleged antithesis in detail, and pass judgment upon it. 

6. "Even if it realizes all that is claimed for it, scientific manage- 
ment can furnish no permanent solution of the labor problem. If it 
gives more, the pressure is relieved immediately, but with increasing 
population it will return." If real wages were generally doubled, 
would that solve the labor problem? If the program of unionism 
was realized in every respect, would that solve the labor problem? 
How long will this problem be with us? 

84. Order 

A. Thus far process, organization, discipline, and other aspects 
of the work of the industrial establishment have not been made to 
conform to standards. The order which pecuniary competition has 
brought is a crude and imperfect one. During the war the attempt 
to increase production was found to involve an attempt to give order 
to the workshop. The most significant work which has been done in 
this direction has been the establishment of the "Whitley councils" 
in England. 

B. Readings 322-25. See also 303, 327-29, 380. 

C. I. Connect the estabhshment of "order" in the workshop 
with the increase of production. 2. What principles underlay the 



iio CURRENT ECONOMIC PROBLEMS 

organization of joint standing industrial councils? 3. State tke 
differences between the Whitley scheme of ''joint control" and the 
scheme which it displaced. 4. Is there a tendency in England 
toward the establishment of an "industrial parliament"? Will this 
tendency be realized? 5. What importance has the ''Whitley 
experiment" in view of American conditions? 

D. I. "The discipline of the shop should be~based upon a code 
of law and usage. The principle which the state employs of embody- 
ing in a code its police regulations is applicable to the shop. The day 
of the arbitrary word of the employer or the foreman is gone." Make 
a study of "discipline" in some unregulated shop. Make out the 
case for the application of "law and order" to shop discipline. To 
what other matters of workshop control should it be applied? 

2. "Changes in process, in machinery, in organization of work, 
and like matters affect the welfare of laborers and their famihes. 
They should have some voice in making the changes." "Workshop 
control belongs to the employer. He has and should have a right to 
do as he pleases with his own." Compare the assumptions underlying 
these two statements. 

3. "Modern democracy will remain inefficient until citizens are 
given training in dealing with group problems. Under modern 
industrial conditions such training can be given only in the workshop. 
To charge laborers with responsibility for certain matters of work- 
shop control will develop acquaintance with modern problems of 
control and responsibihty to society." Make out in full the case 
leading to this conclusion. 

4. Can a scheme of control, such as that suggested in the Whitley 
reports, be applied in a stable industry, manufacturing a single 
standardized product, for which the demand is certain and constant? 
Can it be applied to a nonessential industry, manufacturing several 
specialities, for which the demand is uncertain and capricious? 

5. State the theory underlying the demand of British labor for 
an "industrial parliament." What are the functions of the proposed 
parliament? What would be its relations to the government? Is 
the demand for such an organization likely to arise in this country 
in the near future? 



PROBLEM OF CONTROL WITHIN INDUSTRY ill 

85. Politics 

A. Participation in control by labor raises the question of the 
nature and extent of its control, its method of choosing representa- 
tives, the organization of the representative body, its relation with 
employers, the personnel of the body, and many other questions which 
constitute the increasingly important subject of "politics in industry." 

B. Readings 326-29. See also 7, 45, 274, 380, 381, 384. 

C. I. Why, in connection with labor problems, have we recently 
heard so much about "instincts" and "human nature"? 2. What 
have "instincts" to do with labor politics? 3. Compare in detail the 
"Midvale" and "Colorado" plans with that for "Whitley councils." 
4. Contrast the problem of "industrial relations" today with the 
problem of the eighties and nineties. 5. What modifications in the 
scheme of industrial relations is likely to be effected in the near 
future? 

D. I. "The modern problem of control is adapting a scheme of 
institutions, or of arrangements, on the one hand, to the exigencies 
of the machine process, and, on the other, to the requirements of 
human nature." In terms of this formula outline some three or 
four problems already covered in this course. Account for the 
assumption that institutions are the changing factor in the problem. 

2. "Our problems in the nineteenth century were largely political. 
They found solution in representative government. Before the 
machine came, establishments were small, all contacts were personal 
contacts, and there was no necessity for representative government 
in industry. With the rise of the factory, the growth of the price 
system, and the impersonalization of industrial relations, the parties 
responsible for industry can deal with each other only through repre- 
sentatives." Explain with adequate historical detail the statement 
above. Do you agree? 

3. "The adequate organization of industry cannot be effected so 
long as labor is organized along craft lines. The pattern of labor 
organization fails to correspond with the industrial order. Such 
correspondence is necessary to secure responsibility from labor." 
Can the craft structure of unionism be adapted to meeting this 
demand? 



112 CURRENT ECONOMIC PROBLEMS 

4. "The scheme of shop committees is a device of employers to 
sell labor a gold brick. The control granted by such plans as that of 
the Colorado company is apparent, but not real. Its pretense of 
democracy merely hides an estabhshed paternalism." Comment. 

5. Distinguish carefully between ''politics in industry" and 
"labor in pohtics." What is the probable future of each of these 
movements in the United States? 

86. Standards 

A. The machine process means standardization. This has 
already found expression in technique, in organization, in process. 
It has gained a foothold in hours of labor, personnel of the working 
force, and conditions of employment. Standards are never "logical" 
things. They are based partly upon scientific fact, but also upon 
ideal, and the "logic of an actual situation." They are always in 
process of redefinition. 

B. Readings 330-32. See also 163, 165, 275-80, 304-6. 

C. I. Define the word "standard"; the process of "standardiza- 
tion." 2. Give examples of standards of technique; of organization; 
of industrial processes. 3. Give examples of standardized habits 
which the machine process has forced upon us. 4. Should standards 
for children entering employment be state . or national standards? 
5. Account for the many subjects covered in the list of standards for 
women entering industry. 6. Would the establishment of inter- 
national labor standards make for the peace of the world? 

D. I. Could the "daylight-saving" plan have been effectively 

used before the coming of the machine technique? Its success 

indicates what facts about the use of standards in industrial 
society? 

2. "A living wage should be based upon the normal needs of the 

average employee regarded as a human being living in a civilized 

community" (Justice Higgins). How much of scientific fact can 

underlie the application of this standard to the determination of 

wages? How much of convention and social custom will get into 

its application? How much room for arbitrary judgment is allowed 

in its administration? Is this a fair sample of "standards"? 



PROBLEM OF CONTROL WITHIN INDUSTRY 113 

3. Draw up in outline form a list of standards which you would 
apply to the employer's costs of production to make them include 
all the socially necessary costs and to exclude all the socially unneces- 
sary costs. 

4. Compare the method involved in giving exact meaning to 
such phrases as "necessary costs," "living wage," and "civilized 
community" with that employed in determining the meaning of 
"life, liberty, and property," "general weKare," and "due process 
of law." If such standards are to be established for the world of 
industry, how are they to be worked out? 

5. "In the nineteenth century economics was an affair of natural 
laws; in the twentieth century of 'arrangements.' The nineteenth- 
century economist was engaged in clarifying concepts; the twentieth- 
century economist with the determination of standards." Explain. 



XIV. SOCIAL REFORM AND LEGAL INSTITUTIONS 
87. The Legal System 

A. Our institutions, such as law, property, and competition, are 
interesting alike from the standpoint of order and of welfare. From 
the former viewpoint they are elements in the social order; from the 
latter they are conventions capable of modification in the interests of 
general or group welfare. To questions of the social advisability of 
modifying these institutions, and the nature of such modification, the 
questions which we have already discussed, particularly economic 
insecurity and trade unionism, have led us. The first of these to be 
considered is the legal system. 

B. Readings: Introduction to XIV, 333-36. See also 10, 17, 

25,394,395- 

C. I. Why has the resolution of social problems into institutional 

questions come so late in America? 2. Is the theory of the economic 
basis of law adequate? 3. Show by concrete illustrations that law 
is not immutable. 4. Are there today serious incompatibilities 
between law and the economic and social system? 5. Should the 
law be a conservative or a radical factor in social development? 
6. Does an afiirmative answer to the preceding question commit one 
to opposing the introduction of a new concept of "social justice" 
into the law? 

D. I. Write a short essay upon "The Function of Law in the 
Maintenance of the Economic Order." 

2. "The intricate and delicately balanced industrial system, with 
its requirement of many immediate judgments affecting the future 
welfare of all classes, demands, even more than it demands absolute 
justice, certainty in the law." Show that a definite legal system is 
necessary to efficiency under the present industrial order. 

3. "It is only as law prescribes definite fundamental conditions 
that progress in other aspects of social life becomes possible." Develop 
this argument in detail. Is it valid? 

4. "The legal use of precedents is incompatible with modern 
thought. We know that as time goes on qualitative changes come 

114 



SOCIAL REFORM AND LEGAL INSTITUTIONS 115 

over all things human. Our institutions are constantly becoming 
new institutions. Yet the method of precedents ignores these 
changes, and proceeds as if things called by the same names in the 
sixteenth and the twentieth centuries were the same." Develop this 
argument, citing the most convincing evidence that you possess. Do 
you regard it as conclusively disposing of precedents? 

5. "The individualistic basis of law is incompatible with an 
intricate co-operative industrial system, wherein individual responsi- 
bility cannot be definitely located." Illustrate, by reference to the. 
corporation problem, the problem of the state and the railway, and 
the problem of industrial accident. 

6. "Labor is a commodity which, unlike other commodities 
attaches in a peculiar way to the person of man. Hence conditions 
need to be placed upon its sale which would be unnecessary in other 
cases" (Green). If so, should closed unions be allowed to impose 
these conditions upon employers, or should they be determined by the 
state? 

7. Is a provision stopping prosecution of an individual "for 
entering into any combination or agreement having in view the 
increasing of wages, shortening of hours, or bettering the condition 
of labor" class legislation? What is class legislation? Is legislation 
properly to be condemned because it is class legislation? 

8. "The principle of 'equal rights to all, special privileges to none' 
can be applied in a homogeneous society, composed of individuals 
who, economically and socially, are approximately equal; but it is 
meaningless in a society made up of heterogeneous groups, who per- 
form unlike functions and who occupy unlike positions, economically 
and socially." Explain. What has this to do with "class legislation"? 

9. Formulate a conception of "social justice" relevant to the 
present situation and adequate to the purpose, which can be made 
the basis of our legal system. What is involved in the thorough 
incorporation of such a concept into the law? 

88. Private Property 

A. A second institution, private property, has a like interest 
from the standpoints of order and welfare. Private equities in prop- 
erty, either direct or indirect, are inseparable from social order. But 



Ii6 CURRENT ECONOMIC PROBLEMS 

the distribution, forms, and conditions of ownership of these equities 
are subject to the greatest variety. 

B. Readings 337-40. See also 36, 42, 4sd, 125, 355, 366, 374. 

C. I. Compare the mediaeval and the modern institutions of 
private property. 2. Give an adequate defense of the institution of 
private property. 3. Show by illustrations that property rights are 
relative and not absolute. 4. What are the proper ethical criteria by 
which to judge property? 5. Account for the peculiar constitutional 
position of property in America. 6. Associate the constitutional 
position of property in this country with peculiar features of our 
social development. 

D. I. Distinguish between and pass upon the validity of each of 
the following definitions of property: (a) "ownership of material 
things"; (b) "a, right to a pecuniary income"; (c) "a right to a share 
of the social dividend produced by labor"; and (d) "a complex of 
ideas and regulations as to how accumulated power in the struggle 
for self-maintenance is to be distributed." Formulate a satisfactory 
definition of property. 

2. Show how equities in property may be modified by the state; 
by changes in social conventions; by changes in technique. 

3. "The transition from the personal organization of society in 
the Middle Ages to the pecuniary organization of modern industrialism 
was accompanied by a redistribution between owner and worker of 
the equities in labor and in productive instruments." Explain. 
What light does this throw upon the nature of property? 

4. "Private equities in property are with us forevermore. Under 
forms of collective ownership the nexus between the individual and 
the material thing is broken; but there still remain to individuals 
equities in the organization which owns the material things." Illus- 
trate for monasticism; for a socialistic state. 

5. Show by illustratons how the instituton of private property 
prevents acts economicaly destructive; makes it to the interests of 
various persons to perform productive operations; obliges personsr 
to co-operate; establishes an institutional system that encourages 
co-operation; and enables world-wide co-operation to take place. 

6. "Private property, freedom of contract, and competition are 
complementary institutions, together adapted to the functions which 



SOCIAL REFORM AND LEGAL INSTITUTIONS 117 

they perform in the organization of modern society upon a pecuniary 
basis." Taking this as your text, write a short essay upon "The 
Fundamental Institutions of Organization in Modern Society." 

7. "The real problems associated with private property are con- 
cerned with a distribution of the public and the private equities in 
property." Explain, with concrete illustrations. 

8. "The early church doctrine of Christian communism plus the 
mediaeval recognition of the rights of private property equals the 
modern doctrine of Christian charity." Explain fully. Do you 
agree? 

9. "The two complementary aspects of property are rights and 
responsibilities. For property properly to play its part in the social 
order the two must be associated." Were the two closely associated 
in the Middle Ages? With the rise of modern industrialism which 
has the more nearly dominated the concept? What are the real 
problems relative to property which the modern order has as yet 
failed to solve? 

10. "No personal income without the performance of a personal 
function." Can the defenders of private property accept this 
challenge? 

11. ''The real problem of property is to secure a more equitable 
distribution of its benefits without interfering with the essential 
functions which it performs in organizing society and stimulating 
production." Do you accept this statement of the problem? How 
is it to be solved? 

89. Industrial Liberty 

A. A third institution, industrial liberty, is of a kind with and 
complementary to those just studied. Like them, it is alike a factor 
in social order and in social welfare. 

B. Readings 341-45. See also 14, 18, 23, 258, 271, 287. 

C. I. What is the relation of freedom of contract to the modern 
institution of property? 2. Explain the theory of the ''mediatory 
character of freedom." Is it held by the courts? 3. In the light of 
"what freedom of contract has meant to labor" appraise the argu- 
ment that it develops personal responsibility. 4. Is freedom of 
contract premised upon an outworn philosophy? 5. What influence 



Il8 CURRENT ECONOMIC PROBLEMS 

has the war exerted upon the beUef in the efficacy of freedom of con- 
tract? after the war events? 6. Do those who criticise the legal 
principle advocate its abandonment or its modification? 

D. I. "The spirit of individualism attending the opening of the 
New World and the Industrial Revolution found expression in 
unrestricted freedom of contract. As the industrial system loses its 
transitional quality freedom of contract will be more and more 
restricted." Do you agree? 

2. "The right of a person to sell his labor upon such terms as he 
deems proper is, in its essence, the same as the right of the purchaser 
of labor to prescribe the conditions upon which he will accept such 
labor from the person offering to sell it. So the right of the employee 
to quit the service of the employer, for whatever reason, is the same 
as the right of the employer, for whatever reason, to dispense with the 
services of the employee. In all such particulars the employer and 
the employee have equality of right, and any legislation that disturbs 
that right is an arbitrary interference with the liberty of contract, 
which no government can legally justify in a free land" (United 
States Supreme Court). Is the equality of rights presumed in this 
quotation real or fictitious? Attack or defend this doctrine. 

3. "Because of its false assumption of equality of rights between 
employer and employee, the principle of freedom of contract amounts 
to class favoritism." Do you agree? 

4. "A regulation of the plane of competition necessarily involves a 
restriction of freedom of contract." Why? 

5. "A tenacious insistence upon absolute freedom of contract 
would inhibit any rational attempt at social reform through legisla- 
tion." Using concrete illustrations, defend or attack this statement. 

6. "Public policy is a very unruly horse, and when once you get 
astride it you can never tell where it will carry you." Does this 
statement suggest the legal means by which freedom of contract is 
likely to be modified in the future? 

90. The Courts and Labor 

A. Attempts to advance the pecuniary interests of the laborer, 
whether made by unions or by the state, are likely to involve, directly 
or indirectly, questions of property rights and of freedom of contract. 



SOCIAL REFORM AND LEGAL INSTITUTIONS 119 

Accordingly sooner or later they call for judicial decision. Since for 
the last few years judicial decision has pursued the comparatively 
even tenor of its way, many weapons used to aid organized labor have 
been wrested from its grasp or rendered ineffective. 

B. Readings 346-50. See also 183, 274, 287, 303, 343, 395, 396. 

C. I. Why do judicial decisions have to be taken into account 
in a study of labor standards? 2. Compare the theories underlying 
the decisions of the courts on the limitation of the working day. 
3. Has the employee the same power to determine the conditions of 
his contract as the employer? 4. Would the courts uphold the 
validity of a law prescribing collective bargaining? 5. What is the 
legal issue in the minimum wage? 6. Appraise the assumptions of 
the court in the Coppage case; the assumptions of the dissenting 
opinion in the Hitchman case. 

D. I. "A regulation of conditions of employment for men is 
class legislation." Legally, what is a class? Is a class a reality or a 
legal fiction? In a differentiated society such as ours what is a class? 
In such a society is it practicable to prohibit "class legislation"? 

2. "Freedom of contract can be abridged only by the exercise of 
the police power of the state." For what purposes may the police 
power be invoked? Just how is it to be determined whether a par- 
ticular attempt comes within one of these general purposes? In 
general, should questions of the last kind be determined by the legis- 
lature or by the courts? 

3. "The inherent powers of our courts of equity shall not be 
abridged in the issuance of injunctions in labor disputes; and the 
power vested in our courts to punish for contempt of court shall not 
be abridged by the granting of jury trial for contempt." Connect 
these two questions with the struggle between employers and unions. 

4. "The law does not, and should not, embody a particular 
economic theory." Criticize this statement in the light of judicial 
decisions with which you are familiar. 

5. "The law of property and contract, as interpreted by the 
courts, gives economic advantages of superlative importance to 
capital in its conflict with labor." Do you agree? 

6. "Violence and lawlessness are, of course, to be condemned; 
but what of a legal system that gives to laborers no other means for 



I20 CURRENT ECONOMIC PROBLEMS 

an expression of their just demands?" Is this criticism of the legal 
system warranted? What means have laborers for an expression of 
their demands? 

7. "All regulation of the conditions of employment is deprivation 
of property. Property rights, however, are subject to the police 
power, which can be used in furtherance of the public welfare. Hence, 
in any specific case, the question of 'due process of law' becomes, 
'Does the pubHc interest in this case warrant the encroachment on 
property rights?' " Explain, using illustrations from any case with 
which you are familiar. 

8. The Supreme Court has found that collective bargaining runs 
counter to the public weKare. During the war the government found 
it necessary to resort to collective bargaining to further the national 
interest. Are ''public welfare" and the "national interest" to be 
promoted by different means? Or is it possible that one or the other 
of the two authorities was wrong? 



XV. SOCIAL REFORM AND TAXATION 
91. The Theory of Public Finance 

A. A discussion of the control of industrial development is 
incomplete if it does not touch the problems of taxation; for, first, 
there is the problem of adjusting the scheme of taxation to the new 
forms in which industrial activities run; secondly, if the functions 
of the state are to be increased, there is the necessity of additional 
revenue; and thirdly, there is the ever-present possibility of using 
the fiscal system itself as a means of control. To use such an instru- 
ment as taxation aright we must determine what particular classes 
or properties are to be assessed, why the burdens are to be placed 
upon them, how the taxes thus placed may be expected to behave, 
and what results they will probably lead to. This involves an ade- 
quate knowledge of the technique of taxation and a thorough knowl- 
edge of our social program as a whole and what we expect to accom- 
plish by it. 

B. Readings: Introduction to XV, 351-54. See also 22, 25, 
132, 254, 263, 273, 330, 370, 393, 397. 

C. I. What particular problems have recently given current 
interest to questions of taxation? 2. What changes in social organi- 
zation are we effecting? What influence are they likely to exert upon 
social expenditures? 3. Give examples of current taxes based upon 
the individualistic theory. 4. Are Adam Smith's canons of taxation 
valid today? 5. Appraise the merits of the "benefits theory"; the 
"faculty theory"; and the "theory of proportional sacrifice." 
6. Define and illustrate "progressive taxation." 7. Upon what 
classes and properties, and in what proportions, should taxes be 
levied? 8. Show by illustration how taxation is used as a means of 
control. 9. Should it be so used? Is there any escape from such use? 

D. I. "To extend our educational system; to furnish to the 
people opportunities for recreation, amusement, and cultural develop- 
ment; to lighten the burden of economic insecurity; and to perfect 
an adequate mechanism of social control, we must have additional 

121 



122 CURRENT ECONOMIC PROBLEMS 

revenue." By surveying the problems which we have discussed, show 
quite concretely this need for a growing revenue. Can the established 
tax system yield it in sufficient volume? 

2. "A system of taxation must not interfere with the relative 
advantages possessed by competing business units and industrial 
groups." Of what larger theory is this a mere aspect? Account 
for its popularity. 

3. "In America the system of taxation, by encouragement and 
penalty, has served as a means for determining the direction of indus- 
trial development." Mention taxes whose object has been to dis- 
courage consumption; to encourage production. What particular 
tax has been quite influential in making our culture a highly industrial 
one? Can taxes be levied in such a way as not to exercise control 
over industrial development? 

4. An appraisal of the taxable property of Michigan shows that, 
while all property is supposed to be taxed at a uniform rate, various 
classes of property are in reality taxed at the following rates: agri- 
cultural property, $10 per $1,000; railroads, $20.65; banks, $17; 
public utilities, $7; mines, $7; city residences, $4.70; and manu- 
factures, $5.30. What is meant by "the territorial competition for 
industries"? Do the figures above throw any light upon this com- 
petition? Do they aid in answering the last question in 3, above? 

5. Has the state the moral right to tax the bachelor for the 
support of schools? to pay for harbor improvements through internal- 
revenue duties? to pay for the professional education of lawyers 
and physicians by land taxes? to pay old-age pensions by levying 
income taxes? 

6. "Each should pay in proportion to the benefits he has received 
from the state." Can the benefits yielded by the state to various 
individuals be stated in terms pecuniarily exact? 

7. Should taxation be used to secure "a more equitable distribu- 
tion" of wealth? How can it be so used? 

92. Nature of War Finance 

A. In war finance is a matter of secondary, not of primary, 
importance. Our first demand is for goods and services. Because 
industrial society is organized upon a pecuniary basis, we must have 



SOCIAL REFORM AND TAXATION 123 

money to secure these necessary things, and war finance is a means of 
securing the money. In the late war, as always, the problem was 
whether the needed revenue should be secured by conscription of 
income, by loans to the government, or by inflation. 

B. Readings 355-58. See also 65, 116, 129, 369, 370. 

C. I. Why is there a financial problem connected with organiza- 
tion for war? 2. State the case for and against the conscription of 
income. 3. Can the financing of war by means of loans be justified? 
4. Can those with large incomes be made to pay the cost of the war? 
should they? 5. What are the arguments against financing the war 
by inflation? 

D. I. "The conscription of income is a matter of simple justice. 
The government has long enjoyed the right to conscript men for the 
army. But life is a far more valuable thing than income." Explain 
this argument, using illustrations. 

2. ''The argument against conscription of income is based, not on 
justice, but on expediency." Explain in full. Do you agree? 

3. /'The argument for loans is that, since the results of the war 
are to benefit future generations, future generations should compen- 
sate the present generation for the costs which it has incurred." 
Examine this argument critically. 

4. "The costs of the war cannot be transferred to the future. The 
materials which the war requires are used up while it is going on. It 
is true that government bonds remain outstanding which are to be 
paid at some time in the future. But this does not mean that the 
future will recompense the present. It means that the government 
will collect revenue from taxpayers in the future to pay off bond- 
holders in the future, or that one group in the future is taxed to pay 
another group in the future." Explain in detail. How much truth 
is there in this argument? What costs can be imposed upon future 
generations? 

5. Show how, in a simple agricultural state, organization for war 
is achieved without the intervention of money. Show how, in a state 
enjoying the division of labor, it may be effected without any financial 
program provided the government enjoys prescriptive rights over 
industry. Show how, in a state using the price system, finance is a 
necessary means of organization for war. 



124 CURRENT ECONOMIC PROBLEMS 

6. A chapter of a book upon war finance which appeared in 191 8 
declared in substance: Because of the methods used to finance the 
war the German government is bankrupt. For that reason the 
German armies should stop fighting. But the Germans seem to be 
such fools that they do not know the financial condition of the govern- 
ment and they are still fighting. What delusion about the place of 
finance in war economy does the author of this volume cherish? 

93. War Taxes 

A. Before the war our national system of taxation was 
being re-established upon a new basis. Less reliance was being placed 
in customs duties and excise taxes, and more in the newly contrived 
corporation and income taxes. This tendency to use the newer 
taxes was greatly strengthened by the war. At present the new 
system seems to be firmly estabHshed and a return to the old system 
seems out of the question. 

B. Readings 359-62. See also 113, 152, 369-71. 

C. I. Why are customs and excise taxes unsuitable to the 
demands of war finance? • 2. State the leading features of the current 
national income tax. 3. Which is to be preferred, an excess-profits 
or a war-profits tax? 4. What theory underhes the tax on luxuries? 
5. Give the leading features of the scheme used to finance the 
war. 

D. I. ''The reorganization of the national system of finance 
during the first Wilson administration was one of the most effective 
things the country did to prepare for the war. If the old system had 
been in vogue in 191 7 the problems of war finance could not have 
been successfully solved." Compare and contrast the two systems 
as instruments for securing to the government a large amount of 
purchasing power._ 

2. Make a careful study of the methods used by Great Britain 
to finance the war; the methods used by Germany. Find the 
elements in the situations of the two countries which compelled these 
differences in methods of finance. 

3. Compare and contrast the methods used by the United States 
to finance the late war with the methods employed to finance the 
Civil War. 



SOCIAL REFORM AND TAXATION 125 

4. Point out the place of conscription of income, of loans to the 
government, and of inflation, in the methods employed to finance the 
war. Could a more logical scheme of war finance have succeeded? 
Could inflation have been avoided? 

5. To what extent has the change in the price-level which has 
come about recently been due to the methods employed by the 
government in war finance? 

6. Point out the influence of each of the following upon the 
program of war finance: the demand for revenue; a desire to influence 
individual activity; a desire to affect the distribution of income 
among various groups. 

94. Tendencies in Finance 

A. The war has left its permanent impress upon the system of 
goyernment finance. In part this has come through a redefinition of 
the functions of government and a demand for additional revenue. 
In part it has come from the test to which various taxes were subjected 
in financing the war. It is safe to say that in the future, even more 
than in the past, a consciousness that taxation is a means of control 
will be manifest in fiscal programs. 

B. Readings 363-65. See also 24, 283, 384, 387. 

C. I. State the case for a national budget. 2. Illustrate the 
problem of spheres of taxation for the federal and for the state govern- 
ments. 3. What economic objections are usually urged against the 
inheritance tax? 4. Will the capitalization of the tax free it from 
these objections? 

D. I. List all the examples you have found in this course of 
confusion over federal and state jurisdiction. 

2. Should a tax on luxuries be retained, now that the war is over? 

3. Show that, because of the increased scale of expenditure, the 
federal government cannot return to the older plan of placing its 
main reliance upon customs and excise taxes. 

4. "In modern industrialism all property has a pecuniary aspect. 
In fact, property is valuable only as it yields, or is expected to yield, 
a money income. Its value varies directly with the size of the income. 
Accordingly, all taxes should be abolished except a single uniform tax 



126 CURRENT ECONOMIC PROBLEMS 

on incomes." Does the conclusion necessarily follow? Support or 
attack the conclusion. 

5. Should income taxes be imposed by the nation, by the state, or 
by both? What of corporation taxes? inheritance taxes? 

6. "An income tax should be levied in such a way that it will be 
paid by the assessed out of the part of his income which he spends 
and not out of the part which he saves." Why? Devise an income- 
tax law that will secure this result. 

7. "The greater the aggregate income, the greater the proportion 
which will be saved. If society pretends to make provision for its 
future, it will, therefore, devise a tax system which will place the 
greater part of the tax burdens upon the poor." Elaborate this 
argument. Does the present scheme of taxation meet this ideal? 
If not, what changes would you make in it? Do you accept the gen- 
eral theory that the paying of taxes is an attribute of the poor? 

8. "The principle of graduation, as appHed to the income and 
inheritance taxes, places the burden of taxation where it should rest, 
upon the shoulders of those who can pay." "Graduated income and 
inheritance taxes discourage the display of abihty and enterprise; 
they place a premium on sloth and a discount on thrift." Where lies 
the truth? 



XVI. COMPREHENSIVE SCHEMES OF REFORM 
95. The Voice of Social Protest 

A. A ''program of social reform" is implicit in the preceding 
study. However, to complete our treatment, it seems necessary to 
make at least a brief reference to some of the more radical schemes. 
A suitable introduction to them is the ever-old and ever-new ''cry 
for justice," from which no age and no social system has been exempt. 

B. Readings: Introduction to XVI, 366-68. See also 15, 20, 
21, 24, 39, 45, 56, 69, 75, 80, 198, 231, 239, 240, 247, 250, 255, 270, 
278, 281, 311, 343, 388, 389, 391, 402, 403. 

C. I. Make a list in tabular form of the conditions, institutions, 
etc., against which the protests given in the readings are directed. 
2. Contrast and compare earlier with later protests. 3. Of what 
value is a study of "the voice of social protest"? 

D. I. In the development of society what function is performed 
by protest? Which makes the greater contribution to the develop- 
ment of culture, the conservative or the protestant? the "stand- 
patter" or the "progressive"? What is a "progressive"? 

2. Why has America in the past been relatively free from "radical 
expressions" of dissatisfaction with things as they are? Is this 
immunity destined to be permanent? 

3. Compare the conditions and institutions at which protest is 
directed in non-industrial and industrial societies? Against what con- 
ditions and institutions do modern reformers most vigorously protest? 

4. "The voice of protest is short-sighted and emotional. It is 
the cry of those without imagination and power of abstraction suffi- 
cient to enable them to take a comprehensive and long-time view of 
things." Do you agree? 

5. What "Utopias" have you read? Were they descriptions of 
ideal societies or protest against the schemes of institutional arrange- 
ments under which they were written? In what social Utopia would 
you like to live? ^ 

127 



128 CURRENT ECONOMIC PROBLEMS 

96. The Burden of the War 

A. In the immediate future economic problems are likely to be 
much affected by the attitudes of the people of the several nations, 
and of groups within the nations. Since attitudes are influenced by 
economic environment, they are more or less affected by the burdens 
which the war has left in its wake. A study of programs of reform, 
therefore, cannot overlook a consideration of the lasting costs of 
the war. 

B. Readings 369-71. See also 116, 164, 191, 245, 256, 314, 392. 

C. I. Distinguish between vital, money, and material costs of 
the war. 2. Enumerate the principal items which are included 
among the direct costs of the war. 3. By examples show that the 
effects of the war have been qualitative as well as quantitative. 
4. What has been the net result of the war upon our economic system? 

D. I. Are money costs an accurate measure of the economic 
burdens of the war? 

2. Show how the war has caused a depreciation of plants and 
equipment; an arrest in building; the diversion of the stream of new 
capital to non-economic uses; the disintegration of trade connections; 
an arrest in the development of men for speciahzed pursuits; a 
diversion of scientific work to less novel tasks. Mention other 
indirect costs of the war. 

3. Draw up a similar list of gains which war has effected in 
economic resources and processes. With which list does the balance 
he? 

4. "If we are to escape becoming poorer after the war, we must 
become richer." Explain the paradox. 

5. Explain the economic condition of the various countries which 
engaged in the war with the end of throwing light upon the attitudes 
of their several people toward economic reform. 

97. State Socialism 

A. Thus far socialism has presented a negative rather than a 
positive doctrine. Its concern has been much more with pointing 
out defects in contemporary social arrangements than with elaborating 
new arrangements. Its great services, in the development alike of 



\ 



COMPREHENSIVE SCHEMES OF REFORM 129 

economic science and industrial culture, have been critical rather 
than constructive. For this reason, if we would understand sociahsm 
aright, we must approach it as an economics of protest. Yet, by 
imphcation, it suggests, at least in its very large outlines, a general 
theory for a program of reconstruction. The prevailing type of 
theory, state socialism, aims to substitute the government for the 
owner-manager. 

B. Readings 372-76. See also 9, 25, 58, 70, 281, 384. 

C. I. Enumerate the particulars in which socialist critics insist 
that capitalism has failed. Appraise their arguments. 2. Distin- 
guish between socialism, communism, and anarchism. 3. What 
general principles underlie the proposal for the socialistic common- 
wealth? 4. Is sociahsm to be condemned because its plan for the 
reorganization of society has not been worked out in detail? 5. Will 
socialism rid us of inequality? Will it preserve personal liberty? 
6. How can the transition to the socialist state be effected? 7. What 
contributions to industrial development have been made by the 
sociaHstic indictment of the present order? 8. What social problems 
has this criticism revealed more clearly? 

D. I. "Capitalism is a mere phase of the evolution of society." 
Mention and briefly describe other "phases." Why do, or do you not, 
think that capitalism is the "final form" in economic development? 

2. "In the beginning the Lord created heaven and earth, but 
nowhere on the landscape was there a particle of capital. Then the 
Lord created man; still there was no capital. Then man began to 
labor, and lo! there was capital, created by the labor of the man." 
Does this argument succeed in annihilating capital as a factor of 
production? 

2. "Socialism is based fundamentally upon the same economic 
philosophy as capitalism. Socialism would keep the capitalistic 
structure of society intact. It would change only the equities in the 
ownership of property." Defend or attack this statement. 

3. "The central aim of socialism is to terminate the divorce of 
the workers from the natural sources of subsistence and of culture." 
Is this a correct statement of the aim of socialism? If the state be 
substituted for the private owner, will the sources of "subsistence 
and culture" be any more accessible to the workers? If the divorce 



I30 CURRENT ECONOMIC PROBLEMS 

can be terminated, its termination involves what changes in our 
institutional arrangements? 

4. "The immediate gains to the masses through socialism would 
be more than offset by the ultimate losses which the system, when 
once thoroughly established, would bring about." State and appraise 
this argument. 

5. ''The gains which socialism would effect in the more equitable 
distribution of wealth would be more than offset by the losses in 
productive efficiency which it would entail." Do you agree? 

6. "Socialism would threaten economic welfare by encouraging 
population and discouraging saving." Examine the argument sup- 
porting this conclusion. 

98. Socialist Arguments for the Masses 

A. Socialist writers and orators are much too clever to present 
to the masses a dispassionate and scientifically accurate recital of 
the comparative merits and defects of capitalism and socialism. 
They realize quite clearly that an emotional appeal is necessary to 
make converts. We must not forget that the real socialism of a 
majority of its devotees is not the "sociahsm of analysis" but the 
"socialism of propaganda." 

B. Readings 377-79. See also 56, 307, 366, 367. 

C. I. Make a tabular outline of the charges brought against 
capitalism in these readings. 2. Explain the presence and increasing 
prevalence of these views. 3. Of what value is a knowledge of these 
"arguments" to the student of economics? 4. Of what value is a 
knowledge of economics to the exponent of socialism? 

D. I. "All over this land workers are producing food, clothing, 
and luxuries that others consume; they are building houses that 
others live in; they are constructing railroads that others travel over. 
When socialism arrives, all this will be changed. The workers will 
consume the food, clothes, and luxuries they produce; they will live 
in the houses they build; and they will travel over the railroads they 
construct." Account for this argument. Appraise it. 

2. "All value is produced by labor." "Socialism offers you $1,800 
a year for your vote." Show how the figure $1,800 is arrived at. 
Can socialism redeem this promise? 



\ 



COMPREHENSIVE SCHEMES OF REFORM 131 

3. "A laborer, working in a good factory with up-to-date equip- 
ment, can produce $10 worth of goods in a day. But he gets only 
$2. Somebody else gets $8. Under socialism the $10 would go to 
the laborer who produced it." Admitting the last statement, would 
all of it go to the laborer working in the factory? Should all of it go 
to "labor"? 

4. "Since there is just so much work to be done, labor-saving 
machinery robs men of jobs. It is, therefore, the deadliest curse 
which has fallen upon the human race." Cite similar evidence of the 
opposition of laborers to the introduction of machinery. What 
theory lies back of this opposition? Appraise the theory. 

5. "All values are produced by labor." "All productive property 
should belong to society." "The common wealth should belong to 
all the people." What is the source of these dicta? Examine 
them critically. 

6. "To each according to his personal productive contribution." 
Show the practical difficulties which an attempt to put this principle 
of distributive justice into practice would encounter. 

99. Gild Socialism 

A. Gild socialism represents a scheme for the reorganization of 
the economic system based upon the ideals of state socialism and a 
distrust of the state. Its decentralized plan has been brought into 
prominence largely by the events of the war. 

B. Readings 380-81. See also 128, 322-25, 327, 328. 

C. I. State in its main outlines the "gild" scheme for the reor- 
ganization of industry. 2. Enumerate and explain the differences 
between "state" and "gild" socialism. 3. How has the position of 
capital, labor, and the state in America been affected by the war? 
4. Make a critical estimate of gild socialism. 

D. I. "The antecedents of gild socialism are to be found in the 
tradition of the pre-machine industrial community, in the distrust of 
centralization emphasized by the war, and in the industrial condi- 
tions in the coal industry which is England's leading men's trade." 
Connect these historical antecedents with the gild movement. Men- 
tion others of importance. 



132 CURRENT ECONOMIC PROBLEMS 

2. ''The centralization of industry, under a legalistic scheme of 
control, with government officials at the helm, using a slow, cum- 
brous, unco-ordinated, impersonal, and routine method of adminis- 
tration, is bound to fail." Make definite each of the adjectives 
employed above. Is this indictment fair? 

3. ''State sociaHsm would superimpose from above; gild socialism 
is to be worked out from below. The former would substitute for 
the capitahst an aristocracy of governmental officials. The latter 
would place industry under democratic control." Make clear this 
statement of differences. Do you agree with it? 

4. "Gild sociahsm and Whitley councils are incompatible. Gild 
sociaHsm provides for labor assuming nothing less than full control 
of such industrial functions as it takes over. The Whitley scheme 
provides for joint control of functions." Point out in detail this 
essential difference. 

5. "Gild socialism is evolutionary. Its program is to be gradually 
realized. No gild sociaHst can predict the details of the scheme of 
control which will eventually go into effect." Explain. 

6. Why has the appearance of gild socialism raised anew the 
question of the nature and extent of sovereignty in political science? 

7. Contrast the scheme of gild socialism with the French proposal 
of syndicalism. Why has neither of these schemes found a large or 
serious following in the United States? 

100. Some Reconstruction Programs 

A. The war has left its heritage in a large array of complete 
programs of reconstruction. The nature, scope, intent, and variety 
of these can be shown through selected samples. For the purpose 
the programs of the United States Chamber of Commerce, of the 
Catholic church, and of the British Labor Party are quite adequate. 

B. Readings 382-84. See also in, 132, 133, 166, 196, 326-32, 

397, 404. 

C. I. Account for the appearance of programs of reconstruction. 
2. What range of persons or organizations are responsible for the 
programs? 3. What proposals do you find common to the three 
programs given in the readings? 4. With which of the three programs 
are you most nearly in agreement? 5. What is gained by throwing 



COMPREHENSIVE SCHEMES OF REFORM 133 

proposals together into programs as against considering their specific 
items separately? 

D. I. ''In the wake of the war have come two. opposing ten- 
dencies. On the one hand there is everywhere a spirit of idealism. 
On the other there is a disposition to trust to unconsidered dogma 
rather than to face the sober facts of the present situation." Is this 
accurate? How do you explain the paradox? 

2. "The proposals in the program of the United States Chamber 
of Commerce have as their objective the furtherance of those things 
which give opportunity for immediate money-making. They do not 
aim at the real weKare of the people of the country." Is this true? 
At what would you expect a program of commercial men to aim? 

3. Test the program of the Catholic church in terms of the ideals 
of the mediaeval church for the regulation of trade and of industry. 
Is it based upon the doctrine of stewardship? Does it take adequate 
account of modern conditions? 

4. "The modern church before the war was without a function. 
If the church is to survive it must return to the tradition of being an 
agency of control in behalf of the common good, a tradition which 
guided its avowed policy in the Middle Ages." Discuss. 

5. Why is the program of the British Labor Party not an expres- 
sion of the attitude of organized labor in America? On the basis of 
this program, point out the chief differences between the labor move- 
ments in the two countries. 

6. "The problem of reconstruction we have with us always." 
Why? 



XVII. THE CONTROL OF INDUSTRIAL DEVELOPMENT 

loi. Industry an Instrument 

A. After a survey of a large number of economic problems, our 
study comes back to the question with which we started, namely, 
that of the control of industrial development. By this time we have 
noted that our scheme of control depends upon the ends which we 
would have society attain. We need to note that industry is an 
instrument and that if we know our ends we can — within limits — 
make it serve our purposes. 

B. Readings: Introduction to XVII, 385-87. See also 6, 42, 

43, 707 133- 

C. I. How do we come back to a consideration of the question 
of control with which the course started? 2. Have we ever gotten 
away from it? 3. What is meant by calling the industrial system an 
"instrument"? 4. Define and criticise Tawney's idea of a "func- 
tional" society. 5. Appraise the ethical principles to which Tufts 
insists that industry should be made to conform. 6. What problems 
are raised by the proposal of the British Labor Party that "surplus 
wealth" should be used for the "common good"? 

D. I. Show how the particular problems with which this course 
is concerned are aspects of the large problem of controlhng the 
development of industrial society. 

2. Show that we could not escape trying to control development, 
even if we wished. 

3. How far back can you trace the idea that "industry" is an 
"instrument"? Is it new or old? Is it conservative or radical? 
With what organization has it had the closest association? 

4. "To state that the agencies and instruments in society should 
perform 'functions' is not to settle a problem but to raise one." 
Show that the attack and the defense of the "present system" has 
alike been premised upon a doctrine of function. Has anything 
been gained by Tawney's restatement of the problem? 

134 . 



THE CONTROL OF INDUSTRIAL DEVELOPMENT 135 

5. "Private property, inheritance, freedom of contract, pecuniary 
competition, the price system, and the other 'arrangements' which 
make up the prevaihng economic order are to be defended because of 
the socially important functions which each of them performs." 
With this as a text make an elaborate defense of the institutional 
structure of modern society. 

6. "Natural right, like divine right, is the last defense of indefen- 
sible privilege." Defend or attack. 

102. Control by Magic — Panaceas 

A. The multifarious and bewildering character of our industrial 
society and the interdependence and complexity of its problems have 
been insisted upon all through our study. At its close it can perhaps 
be emphasized in no better way than by presenting a number of 
panaceas, each the work of a "practical" man, and each based upon 
the conception that our industrial system is a simple and easily 
managed one. 

B. Readings 388-91. See also 194, 373, 380. 

C. I. Account for the prevalence of panaceas for economic and 
social ills. 2. State the theory implicit in each of the proposals given, 
determine its assumptions, and criticize them. 3. Of what value is a 
study of social panaceas? 

D. I. Why is it such a common habit to explain things in terms 
of a single cause? Are there problems in which such an explanation 
is valuable? Is such an explanation valuable in a consideration of 
"current economic problems"? 

2. "The opinions of the business man on fundamental economic 
problems are generally unsound; for he, like others, has a habit of 
generalizing from his own particular business and applying his con- 
clusions to industrial society as a whole. Since their application is 
to a situation far larger and more complex than the range of his 
observation and experience; they are almost certainly invalid." 
Explain in detail. 

3. "The business man's concern is with an individual business; 
that of the political executive or legislator with industrial society as 
an entity. They are dealing with problems different in subject- 
matter, in method of approach, and in remedial proposals." Explain. 



136 CURRENT ECONOMIC PROBLEMS 

Does this imply that an executive has no use for knowledge of busi- 
ness? that there is no place for the business man in politics? What 
does it imply? 

4. Why is there such a disposition, particularly in America, for 
every man to be his own political economist? Is this disposition on 
the increase or the decrease? Is this disposition in any way to be 
connected with the prevalence of panaceas? 

5. "Popular belief in social panaceas is responsible for an anti- 
intellectual attitude toward current problems. It prohibits the 
careful consideration, the painstaking analysis, and the deUberate 
formulation of programs necessary to deal with them intelligently. 
It indicates that, so far as economics is concerned, the public is still 
living in an age of superstition." Explain this argument. What is 
it worth? 

6. Is the prevalence of panaceas due to a conception of society 
in static and mechanical terms? If the ''evolutionary," or ''organic," 
viewpoint should become dominant in the popular mind, would 
panaceas lose their hold? 

103. Control by Method 

A. Few will contend that the making of Utopias is not socially 
desirable. Few will deny that agitation has accomplished much 
that is good in the world. Yet, for the double reason that an intelli- 
gent solution of most of our problems requires technical knowledge 
and that scientific method is in use elsewhere, it seems imperative 
that method — rather than agitation — be applied to the arrangement 
of our industrial system to the end that we may get most out of it. 

B. Readings 392, 393. See also in, 133, 165, 196, 320, 321, 

363, 384- 

C. I. How are problems of technique and the organization of 

the shop handled? 2. How are problems of the organization of the 
industrial system handled? 3. Account for the difference. 4. How 
is the "socialization of knowledge" effected at the present time? 
5. Can the process be improved? 6. Are we prepared to put the 
settlement of our economic problems upon a scientific basis? 

D. I. "The whole machinery for deahng with the problems 
which concern the administration of the industrial system rests upon 



THE CONTROL OF INDUSTRIAL DEVELOPMENT 137 

a non-scientific basis. Are the conservatives of the present day 
"economic scientists"? Are the radicals? Can our legislative bodies 
deal in a scientific way with the problems that confront them? 

2. "The problem of the conservation of human resources can be 
stated in scientific terms. A body of scientific knowledge which will 
enable the problem to be adequately solved is in process of growth." 
By reference to employment management, child labor, women in 
industry, industrial fatigue, industrial physiology, and kindred 
topics, translate the two statements above into definite terms. 

3. Give several examples of the rapid socialization of knowledge 
during the war. Why is the normal peace-time process so much 
slower? 

4. "Knowledge of industrial technique is fully a generation in 
advance of its application." Illustrate. Can the same statement 
be made about economic organization? 

5. "Once in business and politics alike the personal judgment 
was all-important. Now the facts to be covered by any judgment 
are too many for any man to gather by personal observation. They 
can all be assembled for judgment only in the form of a quantitative 
statement." Expand and illustrate. 

6. Show that modern control requires of the business or govern- 
mental administrator an acquaintance with quantitative method. 
Would you recommend requiring a knowledge of accounting and 
statistics of all business men? of all governmental ofiicials? of all 
college students? of all under-oj6&cials in business or government 
charged with discretion? 

104. Checks on Development 

A. But let us not forget that there are formidable checks on 
development. One of these is a conservatism that properly refuses 
to surrender the old until the new has made out its case. A second 
is a scheme of vested interests that opposes all change because it will 
interfere with pecuniary rights. And there is a third group of 
institutional factors that tend to arrest development. A constitution 
that rigidly circumscribes social action, a strong distrust of "govern- 
ment meddling," shared by "big" and "little" business alike, a 
pecuniary system that identifies the immediate interests of all classes 



138 CURRENT ECONOMIC PROBLEMS 

with those of the entrepreneur, and a tendency for the reform move- 
ment to discredit itself by ill-considered action are only a few among 
the many factors checking radical change. However radical or con- 
servative our views, we must admit the importance of these elements 
and give proper consideration to them in any program of reform. 

B. Readings 394-96. See also 287, 336, 340, 347, 348, 382. 

C. I. Are constitutions in their very nature conservative? Is 
ours more than others? 2. Is there a "legislative crusade against 
business"? Why do business men so generally think that there is? 
3. Cite opinions you have heard similar to those contained in 61 and 
62. 4. Connect the sensitiveness and delicacy of the machine process 
with the dominance of the entrepreneur viewpoint. 5. What factors 
in society oppose the dominance of this viewpoint? 6. Name legis- 
lative enactments and proposals which run counter to the five general 
conditions mentioned by Root. 

D. I. ''A constitution is not intended to embody a particular 
economic theory." Do you agree? Does ours embody a particular 
theory? 

2. ''Within the last hundred years the aristocracy and the middle 
class have exchanged places as opponents and defenders of laissez 
faire." Explain. Is the laissez faire of today the laissez faire of one 
hundred years ago? 

3. Account for the increasing support given to "state's rights" 
by prominent business men. 

4. "Industrial America is organized as a hierarchy." Defend 
or attack this statement. 

5. "Exactly the same interests are responsible for protection in 
this country and free trade in England." What interests? How 
can they be furthered by different policies in different countries? 

6. "It is the stability of conditions imparted by the conservatism 
of the legal system which makes industrial progress possible." Can 
you construct the argument leading to this conclusion? 

7. Is a stratification of society on pecuniary lines a necessary 
condition of industrial progress? of social progress? 

105. Control by Education 

A. In its long-time aspects the problem of control involves the 
use of the educational system; for action is largely a matter of 



THE CONTROL OF INDUSTRIAL DEVELOPMENT 139 

opinion and knowledge, and the educational system exists for the 
spread of knowledge and the organization of opinion. 

B. Readings 397-401. See also 48, 383, 384, 392, 393. 

C. I. Show by specific examples how education is a means of 
control. 2. When was education divorced from industry? 3. How 
can a proper co-ordination of education and industry be effected? 
4. Should the education of the masses be purely vocational? 5. Out- 
line the elements of a program of education which you would make 
compulsory for all in a democracy. 6. What is the function of the 
college in an industrial society? in a democracy? 

D. I. "The great superstition of the nineteenth century was 
education. Its theory was that knowledge made men more discern- 
ing of the common good and more wilhng to serve it." Do you 
agree? 

2. "Education is necessary to the conservation of our human 
resources." Point out how the industries of the country have been 
led to the estabhshment of schools for their employees. What human 
resources are not Ukely to be conserved by a system of education 
voluntarily established by business houses? 

3. "Education is necessary to the utilization of knowledge.-' 
Make an argument leading to this conclusion, using illustrative 
material. 

4. "Education is necessary to the organization of opinion." 
Show that without organized opinion no scheme of reform can hope 
to succeed. Show that the formation of intelligent opinion neces- 
sitates access to the facts and opportunity to determine their meaning. 

5. "Education is necessary to protect all of us against the igno- 
rance of the uneducated among us." Elaborate the positive con- 
ception of education implicit in this quotation. 

6. What standards should a system of vocational education for 
the laborers of the country meet? 

7. Should tastes be developed in children which, under the exist- 
ing organization of society, they will never be able to satisfy? 

8. Show how one's conception of a scheme of education is bound 
up in his conception of the nature of society and the place of the 
educational system in it? Is the present public-school system based 
upon an adequate conception of the particular function which educa- 
tion has to perforni in 2\, society organized on an industrial basis? 



I40 CURRENT ECONOMIC PROBLEMS 

9. Outline a course of study which you regard as furnishing a 
basic primary culture for a democracy. 

10. What contributions are made by the college to the organiza- 
tion of knowledge? of opinion? of happiness? What place has 
the college in the direction of the development of industrial society? 

106. The Future of Industrial Society 

A. If the course of study, which is just drawing to a close, bears 
any meaning at all, it is that our current problems are slowly develop- 
ing affairs; that they are intimately associated with each other and 
with the developing society of which they are aspects, that they tran- 
scend the mere economic side of life, and that their "solutions" are 
to be sought in a comprehensive, long-time, and ever-developing 
program. For a very tentative statement of the ends, agencies, and 
proposals constituting such a program the student is now ready. 
The very shortcomings of his attempt should show him quite clearly 
his particular lack in factual knowledge, economic principles, general 
social theory, and a philosophy of life. It should mark, not an end, 
but a new beginning of study. 

B. Readings 402-4. See also 1-3 and Introductions to the 
various chapters of Current Economic Problems. 

C. I. What factors require that . economic problems remain 
always with us? 2. Give examples of some of the more immediate 
and obvious agencies that can be used in a solution of current prob- 
lems; of some of the more immediate and obvious things which can 
be done. 3. Illustrate the part which literature and art are likely 
to play in social and economic reform. 4. Can a program aiming at 
less rather than more immediate good be put through in a democracy? 
in a system dominated by the pecuniary calculus? 

D. I. "The limited amount of our natural resources, the lack 
of identity between the interests of social groups, and an antithesis 
between present and future values guarantee to society economic 
problems for all time to come." Explain. Does this argument imply 
that economic problems are equally acute in all ages? 

2. "Modern industrial culture can be characterized by the three 
adjectives, industrial, pecuniary, and urban." Show that each of 
these implies the other two. Show, by clear-cut examples, how the 



THE CONTROL OF INDUSTRIAL DEVELOPMENT 141 

nature of economic problems has been affected by the character of 
our social system. Show that our problems are quite different from 
what they were in the earlier stages of industrialism. 

3. "Current problems are not affairs of the moment. Their 
temporary forms are mere passing aspects of larger and more com- 
plicated problems. For their beginnings we must look into the far- 
distant past. They are in process of gradual solution. Each involves 
something of almost every phase of our complicated social life." By 
taking as an example some one of the problems we have discussed, 
illustrate each of these statements. 

4. "No current, economic problem can be properly understood if 
it be studied in isolation." Illustrate from the topics discussed. 
Can economics be properly understood by one who knows nothing of 
history? of political science? of philosophy? Show the contribu- 
tion which each of these subjects makes to an understanding of 
economics. 

5. "A solution of an economic problem cannot be found by a 
calculation of the utilities and disutilities likely to follow alternative 
proposals. Every proposal involves a distribution of costs and 
utilities between the present and the future, and between different 
classes. The consequences of every proposal are to be found in every 
aspect of life, economic, political, religious, social. There is no magic 
instrument of measurement which can unlock such a riddle." Illus- 
trate by reference to the alternative proposals for solving some of the 
problems discussed above. 

6. "It may be that somehow or other problems get 'solved'; it 
may be that they merely become obsolescent and, like old machinery, 
are 'scrapped'; it may be that they are forced to surrender their 
places to newcomers; or it may be that they tend to lose their identi- 
ties in those of other and larger problems." By concrete illustration 
show how problems have been "solved" in each of these ways. 

7. "It is usually much more accurate to speak of the development, 
rather than of the solution, of economic problems." Explain, say, 
by showing how, time after time, the problem of the public and the 
railroads has been solved. 

8. "The solution of an economic problem involves a succession 
of choices between conflicting and incommensurable values. " Explain 



142 CURRENT ECONOMIC PROBLEMS 

in detail with illustrations. Does this statement, if true, encourage or 
discourage the attempt to deal with problems in isolation? 

9. "Both the very existence and the solution of problems depends 
upon contemporary social philosophy." Explain and illustrate. 

10. Reduce the problems which have been discussed in this 
course to the smallest number possible. Is there any unity among 
the few that you have left? Can they all be reduced to a single 
problem? 

11. Formulate, in as great detail as necessary, a comprehensive 
and consistent program covering all the problems which have been 
discuEsed in this course. Begin with a statement of the general 
theory of the ends you wish to accomplish, the agencies you wish to 
employ, and the methods you wish to use. Follow this with a clear- 
cut statement of your several proposals, being sure that they are 
properly classified. 

12. Make a careful criticism of the tentative program which you 
have formulated. Enumerate the points upon which you are not 
sure of the facts, of economic principles, of general social theory, of 
your philosophy of life. What further studies in economics and in 
the humanistic sciences does it appear that you should make? What 
seems to you to be your next task ? 



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